‘Business insurance’ is the umbrella term given to a number of different policies that may be desirable or necessary to protect your business. They are equally suited to limited companies, business partnerships and sole traders.
The nature of your business will determine what type of business insurance you will need. There are three main types of business insurance (ones that most businesses will require): employers’ liability insurance; public liability insurance and professional indemnity insurance. This article will demonstrate why it is so important to ensure that your business has employers’ liability insurance in place.
If you run any kind of business (a limited company, partnership or sole trader’s practice) that employs anyone, it is a legal requirement that you have employers’ liability insurance in place. It is therefore compulsory to have it and if you don’t have it then you can be prosecuted in a criminal court and face a hefty fine (calculated to reflect the number of days you’ve been without insurance when you should have had it) and/or imprisonment.
The reason that employers’ liability insurance is a legal requirement is that the UK government wants employees to be protected against being injured at work and then being unable to gain compensation for their injuries because of insufficient money held by the employer. At least if employers’ liability insurance is in place there will always be a pot of money available to claim against if an employee is injured. Employees are also more likely to seek just and fair compensation from their employer if they think that there is an insurance policy in place: after all, they wouldn’t want to sue their employer if doing so would put their employer out of business because they’d lose their job!
The definition of an ‘employee’ is very broad. Whilst you may not consider a person who does the occasional piece of work for your business to be an ‘employee’, a court might think otherwise. If someone who carries out work for you at your request doesn’t have a contract or isn’t paid, then they can still be classed as an ‘employee’ for the purpose of employers’ liability insurance. It is better to assume that your worker is an employee and take out employers’ liability insurance.
The legal minimum required to be insured is £5million. But if you have several employees you should consider taking out a higher level of cover.
Without employers’ liability insurance in place then not only will you face criminal charges but you will also be sued through the civil courts for compensation – which would come out of the company’s assets if it were a limited company or out of your personal assets (including your home) if your business is not limited and there are insufficient business-related assets to pay the compensation and legal fees.
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