What Is Employer’s Liability Insurance?

Employer’s Liability Insurance protects businesses against compensation claims from employees who suffer an injury or illness due to their work. In the UK, most employers must have this insurance by law to cover potential claims from current or former employees.

This guide explains how Employer’s Liability Insurance works, what it covers, legal requirements, exemptions, and how it differs from Public Liability Insurance.

How Does Employer’s Liability Insurance Work?

Employer’s Liability Insurance provides financial protection for businesses if an employee claims they have been injured or become ill due to work-related conditions. The insurance covers:

• Legal fees if an employee sues the business.

• Compensation payouts awarded to the employee.

• Medical expenses related to workplace injuries.

If a business does not have valid Employer’s Liability Insurance, it may face fines of up to £2,500 per day from the Health and Safety Executive (HSE).

What Does Employer’s Liability Insurance Cover?

Employer’s Liability Insurance covers claims made by employees due to:

• Workplace injuries (e.g., slips, falls, accidents).

• Occupational diseases (e.g., hearing loss from excessive noise exposure).

• Long-term illnesses caused by workplace conditions (e.g., asbestos-related illness).

• Psychological harm due to workplace stress or harassment.

Claims can be made even years after employment ends if a health condition is linked to past work conditions.

Is Employer’s Liability Insurance a Legal Requirement?

Employer’s Liability Insurance is a legal requirement for most UK businesses under the Employers’ Liability (Compulsory Insurance) Act 1969.

Businesses must have at least £5 million of cover, but many insurers offer £10 million as standard.

Failure to have valid insurance can lead to fines of £2,500 per day until the business gets insured.

How Much Cover Do I Need?

The legal minimum is £5 million, but some businesses may need more. Insurers typically offer cover levels of £5 million, £10 million, or more depending on:

• The number of employees.

• The risk level of the business (e.g., construction businesses require higher cover).

• The claims history of the business.

Most small and medium-sized businesses opt for £10 million of cover, which is included in most standard policies.

Examples of Employer’s Liability Insurance Claims

Example 1: Workplace Injury

An employee falls from a ladder while working in a warehouse and suffers a serious back injury. They sue the company for negligence, claiming the ladder was faulty. Employer’s Liability Insurance covers:

• The employee’s compensation payout.

• The company’s legal defence costs.

Example 2: Occupational Illness

A former employee develops lung disease from exposure to chemicals in a factory. Years later, they file a claim against their former employer. The insurance covers:

• Medical expenses related to their condition.

• Compensation for loss of earnings.

Who Is Usually Exempt from Employer’s Liability Insurance?

Some businesses do not need Employer’s Liability Insurance, including:

• Sole traders with no employees.

• Businesses where only close family members work (unless the business is incorporated).

• Public sector organisations such as government departments and local councils.

If your business employs anyone, even part-time or temporary staff, you are legally required to have Employer’s Liability Insurance.

Do I Need to Tell Employees About This Insurance?

Businesses must display a copy of their Employer’s Liability Insurance certificate in the workplace. If requested by Health and Safety Executive (HSE) inspectors, employers must produce proof of insurance immediately.

Failing to provide a certificate when requested can result in a £1,000 fine.

What Is the Difference Between Public Liability and Employer’s Liability Insurance?

Employer’s Liability Insurance covers claims made by employees, while Public Liability Insurance covers claims made by customers, visitors, or third parties.

Employer’s Liability

• Covers Claims: Employees

• Examples: Workplace injuries, work-related illnesses

Public Liability

• Covers Claims: Customers, visitors, third parties

• Examples of Claims: Slip-and-fall accidents, property damage

Many businesses take out both types of insurance to ensure full protection.

Who Does Employer’s Liability Insurance Cover?

Employer’s Liability Insurance covers:

• Full-time employees.

• Part-time employees.

• Temporary workers.

• Apprentices.

• Volunteers and interns (in some cases).

The policy protects the business and its employees, ensuring financial security if a claim arises.

Final Thoughts

Employer’s Liability Insurance is a legal requirement for most UK businesses and protects employers against claims made by employees for workplace injuries and illnesses. Without it, businesses face fines of £2,500 per day and potential lawsuits.

To ensure compliance, businesses should:

• Check they have at least £5 million of cover.

• Display the insurance certificate in the workplace.

• Compare policies to find the best cover for their industry.

For more details on legal requirements, visit GOV.UK or speak to an insurance provider to find the right policy for your business.