Liability insurance – 10 things you need to know

As someone running a business you know only too well that it is impossible to eliminate all risks. Accidents and mishaps can and do happen, even when you’ve tried hard to avoid them. It’s a fact of life.

The law says that if you cause damage to someone or their property, or they are injured or ill while they are employed by you, then you will have to pay the claim amount. Some claims run into hundreds of thousands of pounds, which you would have to pay if you are not insured. That could ruin you, your business and your family. Here are 10 things you need to know. 

1. What is Public Liability insurance?

Put simply this type of insurance covers any awards of damages given to a member of the public because of injury to them or damage to their property caused by you or your business. It also covers any related legal fees, costs and expenses. So you need cover to safeguard your future if members of the public or customers come to your premises or you go to theirs.

2. Must I have Public Liability insurance?

Not currently by law except for certain trades, but ask the question…Do customers require me to be insured? And the answer is most likely to be Yes. More and more customers and potential customers require proof of adequate insurance before they will allow you to work for them. Building sites especially will always require sight of cover before they will let you onto their site. 

3. What sort of thing will it cover me against?

You run a tiling business. You accidentally damage a water pipe which, overnight, floods the offices below. Not only does your client make a claim against you, but the offices below would claim against you for damage to computer equipment, carpets, furniture and redecoration. 
A customer comes round to your small office to talk over the plans for the new bathroom, she trips and hits her head on the side of a metal filing cabinet. The customer is then off work for 4 months. She then makes a claim against you for the injury. 
4. How much will it cost? 

This all depends on which trade you are, what the risk is, what level of cover you require and how long you have been claim free. Unfortunately for plumbers there is a far greater risk than carpenters. The standard public liability cover for most businesses is £1 million, premiums start from £60.00 a year. This type of insurance is very easily purchased online by following the links below where you will get a competitive quotation from a panel of the UK’s leading insurers.

5. What is Employers Liability insurance?

This cover simply enables businesses to meet the costs of compensation and legal fees for employees who are injured or made ill at work through the fault of the employer. Don’t forget that employees injured due to an employer’s negligence can seek compensation even if the business goes into liquidation or receivership.

6. Do I have to be insured?

By law – Yes (there are some exceptions which we’ll talk about in a moment). The law requires that an employer must have Employers Liability insurance and be insured for at least £5 million. Most insurers automatically provide cover for at least £10 million. Employers Liability insurance must cover all your employees in the UK. 

There are exceptions. If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory Employers Liability insurance. But be wary; are you sure you really have no employees? Also Since February 2005, limited companies with only one employee, where that employee also owns 50% or more of the issued share capital in the company, have also been exempt from compulsory Employers Liability insurance. 

7. What happens if I don’t have insurance?

You can be fined up to £2,500 for each day that you do not have the appropriate insurance. This can and does ruin small businesses. Imagine just 6 months’ worth of fine could run to £450,000! 

It is mandatory to have adequate Employers Liability insurance if you employ temporary staff. It is a criminal offence not to do so.

8. What about self-employed staff?

Perhaps you use self-employed people or out source work, does that mean you are exempt? Sadly it may not. Depending on your terms and conditions, self-employed contractors may be viewed as employees in the eye of the law. It’s especially likely if you are their only customer. 

9. What about unpaid or voluntary workers?

The same is true for voluntary workers, even unpaid people who might be helping out where you have responsibility for their activities and are supervising them may be considered as employees and therefore you have a legal obligation to be insured.

If you are in any doubt at all you should seek legal advice.