Cyber Insurance Explained
Employers Liability Insurance: What It Is and Who Needs It
If you employ anyone in the UK, employers liability insurance is almost certainly a legal requirement, not a nice-to-have. So what is employers liability insurance? It is cover that pays compensation and legal costs if an employee is injured or made ill because of the work they do for you, and the law has required most employers to hold it since 1969. Getting it wrong is one of the few insurance mistakes that carries a fine for every single day you are uninsured.
What employers liability insurance actually covers
Employers liability (EL) insurance responds when a current or former employee claims that their work caused them harm and that you, as the employer, were at fault. It covers:
- Compensation awarded to the employee for injury, illness or disease linked to their job.
- Legal defence costs, which can dwarf the compensation itself even when a claim fails.
Typical scenarios include a warehouse worker hurt by faulty equipment, an office employee developing a repetitive strain injury, or a former staff member diagnosed years later with a work-related illness. Because some conditions surface long after the work ended, claims can arrive many years after someone has left, which is why keeping old certificates matters (more on that below).
Is employers liability insurance a legal requirement?
For most businesses with staff, yes. The requirement sits in the Employers’ Liability (Compulsory Insurance) Act 1969. If you employ at least one person, you almost certainly must hold EL cover, and it applies whether the person is full-time, part-time, temporary, casual, an apprentice or a young person on work experience. What matters is the working relationship, not the job title.
The legal minimum level of cover is £5 million, though in practice most insurers provide £10 million as standard, and many commercial contracts ask for that higher figure. The government sets out the rules on the gov.uk employers’ liability insurance page, and the Health and Safety Executive publishes detailed guidance in its HSE40 booklet.
Who is exempt
A minority of employers do not need EL insurance:
- Sole traders or companies with no employees, for example a one-person limited company where the only worker is also the sole director and owner.
- Family businesses where every employee is a close family member (spouse, civil partner, parent, child, sibling and similar), unless the business is a limited company.
- Public organisations and some government-funded bodies, which are covered differently.
The family exemption trips people up: it disappears the moment the business is incorporated as a limited company, so a limited company employing a family member usually still needs cover. If you are unsure, treat cover as required until you have confirmed otherwise.
The penalty for not having it
This is where EL insurance is unusually strict. If you are required to hold cover and do not, you can be fined up to £2,500 for every day you are without it. You can also be fined for not displaying your certificate or refusing to make it available to an inspector. There is no “we forgot” defence, and the daily nature of the fine means a lapse of a few weeks becomes very expensive very quickly.
You must keep and show the certificate
When you take out EL cover, the insurer issues a certificate showing the insured, the policy period and the minimum cover. The rules here are specific:
- Display it where staff can read it, or make it available electronically (on an intranet or shared drive) as long as every employee knows how to find it and can access it.
- Keep old certificates. Because work-related illnesses can appear decades later, former employees may bring claims long after leaving. Retaining past certificates lets the right historic insurer be identified. Keeping them for at least 40 years is the widely recommended practice.
Employers liability vs public liability vs professional indemnity
These three often sell together but protect against different things, and confusing them leaves gaps:
- Employers liability covers your employees if their work harms them. Legally required if you have staff.
- Public liability covers members of the public and clients, for example a customer who slips in your premises or whose property you damage. Not legally required for most firms, but often demanded by contracts and landlords. People frequently search for “public and employers liability insurance” because the two are usually bought as one package.
- Professional indemnity covers claims that your advice or professional work caused a client financial loss. Essential for consultants, designers, accountants and similar.
A packaged “public and employers liability insurance” policy is common for trades and shops; a professional services firm typically pairs employers liability with professional indemnity instead.
Where cyber insurance fits alongside it
EL, public liability and professional indemnity handle physical injury and professional mistakes, but none of them properly cover a data breach, ransomware attack or business interruption from a cyber incident. Those risks sit with a separate cyber insurance policy. If you are working out your full business insurance stack, our guides on whether your business needs cyber insurance and what cyber insurance costs a UK small business cover the part that EL and public liability leave open.
How to get it right
- Confirm you need it. If you employ anyone who is not solely a close family member (and you are not an exempt public body), assume you do.
- Choose your limit. £5 million is the legal floor; £10 million is standard and often contractually required.
- Check who counts as an employee. Labour-only subcontractors and casual staff frequently count, so ask your broker rather than guessing.
- Display or publish the certificate and make sure staff can access it.
- Archive old certificates for at least 40 years.
Frequently asked questions
What is employers liability insurance in simple terms? It is insurance that pays compensation and legal costs if one of your employees is injured or made ill because of their work and you are found responsible. UK law requires most employers with staff to hold it.
Is employers liability insurance a legal requirement in the UK? Yes, for most businesses that employ people, under the Employers’ Liability (Compulsory Insurance) Act 1969. The minimum cover is £5 million, and being uninsured can cost up to £2,500 for each day without cover.
Who is exempt from employers liability insurance? Sole traders and single-director companies with no other employees, businesses that only employ close family members (unless incorporated as a limited company), and certain public organisations.
What is the difference between employers liability and public liability insurance? Employers liability covers your own employees if their work harms them and is legally required if you have staff. Public liability covers injury or damage to members of the public or clients and is usually optional but often required by contracts. They are commonly sold together.
How much employers liability cover do I need? The legal minimum is £5 million. Most insurers provide £10 million as standard, and many client or landlord contracts specify that higher amount, so £10 million is the safer default.
How long should I keep employers liability certificates? Keep them for at least 40 years. Some work-related illnesses appear decades after exposure, and old certificates identify which insurer should handle a late claim.
