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Employers' liability insurance is a form of business insurance that protects employers if their employees become ill or injured while carrying out their work. It covers the costs of legal expenses, compensation payments, and other associated costs resulting from claims made by employees. This not only safeguards your business from potentially significant financial losses, but also provides peace of mind.

In the UK, businesses are legally required to have employers' liability insurance under the Employers’ Liability (Compulsory Insurance) Act 1969 and the Employers’ Liability (Compulsory Insurance) Regulations (Northern Ireland) 1999 if they have one or more employees. Despite this, Association of British Insurers research found that, as of January 2026, some 39% of SMEs with 1 to 9 employees didn’t have compulsory employers’ liability insurance, putting them at financial and legal risk.

Business liability claims are costly, with £7.6 million paid out per day to cover compensation and legal expenses. Without adequate cover, a single claim could have a devastating impact on a business’s finances.

Employers’ liability insurance is a legal requirement for most businesses in the UK, ensuring protection for anyone working for you. It safeguards your business from claims if an employee is injured or falls ill due to their work.

It's needed if you employ:

  • Full-time and part-time employees

  • Self-employed contractors (unless they provide their own tools and work entirely independently)

  • Temporary staff, apprentices, or volunteers

  • Anyone on work experience/training schemes

If you’re required to have a policy, it must cover at least £5 million and be provided by an authorised insurer. Not having adequate cover can lead to significant penalties:

  • £2,500 per day for not having the required insurance

  • £1,000 if you fail to display your Employers’ Liability Certificate where staff can see it, or if you refuse to show your insurance certificate to an inspector when asked

While employers’ liability insurance is a legal requirement for many businesses, there are specific situations where it may not be necessary.

For example, you may not need to purchase it if:

  • You run a family business and only employ close family members (unless your business is a limited company)

  • You run a company in England, Scotland or Wales and employ someone who is based outside Great Britain, or you run a company in Northern Ireland and employ staff based outside the UK

  • Your business is a public organisation, health service body, or another exempt publicly funded organisation

  • Your business is a limited company with no employees other than yourself, and you also own 50% or more of the share capital

If you’re unsure about your legal obligations, it’s always worth seeking advice before making any decisions and consider the differences between different types of cover like public liability.

Employers' liability insurance: example claim scenarios

The cost of employers’ liability insurance depends on several factors, including the nature of your business, the size of your workforce, and the level of risk involved in your operations.

The main things that will be taken into account are:

  • Industry: The level of risk associated with your business operations will influence the cost. High-risk industries — construction and manufacturing, for example — will generally face higher premiums owing to the greater likelihood of workplace accidents.

  • Business size: Larger businesses with more employees will typically pay higher premiums. The more individuals, the higher the potential cost of claims.

  • Coverage level: The amount of coverage you need will also affect your premium. The legal minimum cover is £5 million, but you might decide to choose higher limits depending on the nature/size of your business.

  • Claims history: If your business has a history of making claims then insurers could regard your business as riskier than another similar operation. This could lead to higher premiums.

  • Health and safety record: A strong health and safety record can help lower premiums, as insurers are likely to view your business as having a lower risk of workplace accidents.

Be mindful of the fact that insurers will assess risk factors slightly differently. Comparing quotes from different providers can ensure you’re best placed to find the coverage that works for your business.

How to choose an employers' liability insurance policy

Choosing the right employers’ liability insurance policy is an important business decision. Here’s a step-by-step guide to help you make the right choice.

Determine if you need it

If you have one or more employees, you’ll likely need an employers’ liability policy. It's a legal requirement for most businesses and is designed to cover the cost of compensation if an employee becomes ill or is injured at work, and they decide to claim against your company.

Identify the cover you need

Policies differ in terms of coverage limits, exclusions, and specific protections. When choosing a policy, consider the nature of your business and the types of risks employees might face. Some businesses — those in construction and manufacturing, for example — are likely to require more comprehensive coverage than other sectors.

Compare quotes

Once you’ve determined the coverage you need, it’s always worth comparing quotes from different insurers to find a policy that aligns with your specific requirements. Don’t just focus on price; make sure the coverage offered meets all your needs.

Review the policy documents

Before purchasing your chosen policy it’s important to carefully review the associated policy documents. These will outline the terms of the coverage, what’s included and excluded, the claims process, and various other key pieces of information.

Purchase the policy

Once you've selected the right policy for your business you can easily purchase it online. It’s then a good idea to regularly review your policy to make sure it still fits your business as it grows and changes.

Employers' liability insurance costs vary based on factors like business size, industry risks, and claims history, with larger businesses typically paying more.

Comparing quotes can help you find the right coverage at the best price.

How to make a claim on your policy

If an employee suffers an injury or bout of illness at work and you need to make a claim on your employers’ liability insurance, these are the steps that you will likely need to take.

Report the incident

As soon as the incident occurs — or as soon as you become aware of it — report it to your insurance provider. This might include filling out an incident report and providing details about the injury or illness, the circumstances, and the immediate actions taken. Keep a thorough record of everything related to the incident, including things such as medical reports and witness statements.

Provide supporting evidence

It’s always beneficial to provide the insurer with as much detail as possible so the claim can be properly assessed. This could include anything from photos of the scene, medical records, witness statements, as well as any internal investigations conducted. The more evidence you’re able to provide, the easier and quicker the claims process is likely to be.

Cooperate with any investigation

Your insurer may carry out its own investigation. If this happens, it’s important to cooperate fully and provide any further information that is requested. It’s important to act quickly and keep your insurer informed throughout the process to ensure any claim is handled efficiently.

When it comes to protecting your business, it’s important to consider more than just employers’ liability insurance.

  • Public liability insurance: This covers damage caused by your business to a third party or their property. A third party is usually anyone who isn’t employed by your business.

  • Professional indemnity insurance: This covers claims arising from mistakes, errors, or omissions in the advice or services provided by you or your company. It protects against legal costs and compensation making it suitable for startups.

  • Goods in transit insurance: This covers loss, damage, or theft of goods belonging to clients or customers while they’re being transported. It provides protection during the journey, whether shipping products or delivering services.

  • Tool insurance: If your business relies on tools — whether small items like hammers and saws, or larger equipment like diggers — tool insurance can be invaluable. It covers the cost of replacing essential tools and equipment if they’re lost, stolen, or damaged.

  • Shop insurance: Shop insurance protects your business from risks like damage to property, theft of stock, or customer claims related to items sold. It also covers situations such as shop closure due to flooding.

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About the author

Joe Phelan profileJoe Phelan
Joe joined the money.co.uk team in 2024, where he helps small business owners navigate the often confusing world of business finance. His role is to cut through the jargon and create clear, actionable content that empowers entrepreneurs to make confident financial decisions.

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