Liability Insurance

Liability Insurance

Employers’ liability insurance

Most employers are obliged to take out employers’ liability insurance as soon as they start their business.

This is to cover the cost of compensating any employees who become ill or are injured while working for you.

The policy you take out must cover you for at least £5m and be provided by an authorised insurer. You can be fined £2,500 for every day that you do not have the correct insurance in place.

The cost of your employers’ liability insurance policy will depend on, among other things:

• the nature of your business
• the number of people you employ
• your previous insurance claims history

Exempt employers

There are a few types of an employer which do not need to take out employers’ liability insurance.

These can include companies that have no employees and companies that only employ family members or people who are based abroad. You can check your company’s status on the Health and Safety Executive’s website.

Public liability insurance

If your business interacts with the public, you may also have to consider taking out public liability insurance.

This insurance will cover you for any claims made by the public for incidents that occur on your premises or at events arranged by your business.

This could be personal injury, loss of or damage to property, or even death.

So if you own business premises that outsiders regularly visit (or they visit your home), or you organise events that are attended by members of the public, you should get public liability insurance.

One type of business that is legally obliged to have this insurance is horse riding establishments.

As with employers’ liability insurance, the cost of your policy will depend on:

• the nature of your business
• the number of people you employ
• your previous insurance claims history

Professional indemnity insurance

Professional indemnity insurance protects you from claims for negligence made against you. You should consider taking out this type of insurance if your business offers knowledge, skills or advice.

Some professions, such as solicitors and accountants, are obligated to have professional indemnity insurance by their professional bodies or regulators.

Professional indemnity insurance protects against claims for loss or damage resulting from negligent service or advice provided by your business, both from clients and third parties.

This type of insurance generally only covers you for claims that are brought against you during your policy.

For example, if a claim relating to an incident in 2013 was made in 2014, you would normally not be covered if you only had insurance during 2013.

However, as claimants only have six years after an incident in which to lodge a claim, purchasing what is known as a run-off policy can cover you against such claims if you cancel your professional indemnity insurance.

The amount of cover needed varies from profession to profession, but some require a minimum level of cover, such as solicitors.

Product liability insurance

Product liability insurance covers you against compensation claims due to faulty products produced, designed, or supplied by your company.

It protects you against claims for personal injury and loss of or damage to property caused by faulty products.

Even if your products are given away for free, you should consider taking out product liability insurance.

Product liability insurance policies usually provide cover for compensation claims between £1m and £5m.

Other types of business insurance

Depending on the type of business you run you may need more specialised types of insurance. Here are a few examples:

• Business interruption insurance – this covers you against loss of income caused by an unexpected event such as damage to premises or breakdown of the equipment which leaves your business unable to operate as normally.
• Key man covers – essentially a life insurance policy covering an important employee, to reduce the impact in the event of their death.
• Property and buildings insurance – to cover against loss or damage caused by fire, lightning, gas explosions, etc.
• Business assets and equipment cover – to cover against theft and failure of electrical or mechanical equipment.