Know What Employers Liability Insurance Covers

Insurance is an important part of the risk management system for businesses, whether they are small or big, to protect themselves from unforeseen losses. Of all the different types of insurance policies, Liability Insurance is considered to be the best one as it provides compensation for the claims associated with liability cases. There are three main types of liability insurance – public liability, product liability and employers liability insurance. Here, we will discuss about employers liability insurance.

As a business owner, you are responsible for the health and safety of your employees, while they are on the job. However safe your business environment is, there is always a chance of your employees becoming ill or injured at work. If your employees believe that you are responsible for workplace accidents, they might claim compensation. Therefore, it is very much necessary for you to know about the E.L.I and what it covers in order to protect your business from employees’ claims.

Sometimes, these claims could result in thousands of pounds in workplace compensation. Your business could go bankrupt if you don’t have Employers’ Liability Ins. to cover such claims.

Who requires employers liability insurance
In some countries like the United Kingdom, It is a legal requirement – not an option. Generally speaking, all businessmen or professionals who have employed staff should have employers’ liability cover.

It is compulsory in case of limited companies or if you deduct National Insurance (NI) contributions and income tax from the salary of your employees. Even if you occasionally hire staff, use temporary or seasonal workers, trainees or sub-contractors, you should opt this insurance.

You need to take E.L.I policy when you decide where, when and how someone works. Also when you supply work materials and equipment for them to work.

You need this insurance even if you work from home. It is better to take a combination of Employers’ and Public Liability Insurance policy cover if your customers or partners visit your business.

Your business will be exempted from the E.L.I if yours is a family business, your business is not a limited company and you are the only employee – or if you employ only close family members, yours is a limited company with just one employee – where that employee also owns 50% or more of the issued share capital in the business.

What does employers liability insurance cover
ELI provides you valuable protection against claims of employees who are injured or made ill at work. It meets the cost of compensation for injuries caused to your employees on or off site. It provides financial back up to meet the legal costs of defending a claim made by an employee. Another important benefit of Employers’ Liability Insurance is that your employees will be more secure knowing that in the event of injury or harm, their injuries or losses will be covered by the business.

When can an employee file it against you
Some situations when your employee has the right to file a liability claim against you include discrepancy in the calculation of wages, miscalculation in the number of working hours, occurrence of any work related accident that results in injury or death, illness due to negligence on working environment.

As a smart business owner, you need to take practical steps to make sure that your employees are safe at work. However, you should carry out risk assessment, and be ready with employers liability insurance to protect your business against the risks that might arise from employing people. While choosing employers’ liability insurance, make sure that the policy covers all of your business activities.

Employers Liability Insurance

Employers liability insurance, or employee liability insurance as it is more sometimes known, is one of the few legally required classes of insurance in the United Kingdom. The employee liability insurance policy is designed to protect the policyholder against claims in respect of their legal liability for injury or disease sustained by an employee during the course of their employment. Under the Employers Liability (Compulsory Insurance) Act 1969 all employers are required, by law, by to hold employers liability insurance. There are limited exceptions to this requirement and these include

Non-incorporated businesses employing only close family members e.g. spouse, son, daughter, grandson
Incorporated bodies, limited companies, where the only employee also owns more than 50% of the equity in the business. (from 28 February 2005)
Public service bodies and certain other prescribed organisations.

The current legal requirement for the limit of indemnity, the cover under the policy, is not less than £5 Million. In practice most insurers provide a limit of £10 Million as standard, although this may be increased by the employer if it is not felt to be adequate. Employers Liability Insurance in Practice In general employers liability cover is not available in “isolation” that is to say that insurers avoid providing cover for employers liability on its own. It is more usual for the cover to be arranged in tandem with public liability cover or as part of a package of insurances such as commercial combined insurance, office insurance or shop insurance. Employers Liability Claims It is in the nature of employers liability claims that whilst some claims incidences are immediately apparent to both employer and employee, there is the potential for claims to arise many years after an employee has left the employer or indeed the employer has ceased trading. This is of course a feature of claims relating to industrial disease.

The ability to correctly identify the correct insurer, or insurers, at the time or during the period that the injury took place has been a focus of attention over recent years. In 1999, the Employers’ Liability Code of Practice was adopted by many insurers From Spring 2011 the Employers’ Liability Tracing Office (ELTO) will collect information from member insurers and maintain a database of employers and the details of their employers liability insurance with the intention of creating a single archive for this information for the future. Initially, the information on the new database will include;

All policies taken out or renewed from April 2011
Policies that have been traced previously by the search office
All policies where a new claim is notified

Whilst insurer membership of ELTO is not mandatory the Financial Services Authority has made the publishing of the employee liability data a legal requirement for all insurers engaged in this business in the United Kingdom. Consequently a significant majority of insurers have joined the programme prior to the “go live” date. In future the Employers Reference Number (ERN) also referred to as the PAYE number will have to be collected for all employee liability policies. There are certain classes of employer who will not hold an ERN and these will be exempted accordingly.

Buying Employers Liability Insurance

Employer liability insurance is available from specialist liability insurance brokers and from a range of direct insurance companies operating across the United Kingdom. Increasingly clients are able to obtain quotations and immediate cover from a wide range of web sites, in addition to the traditional outlets of the high street insurance broker. The premium for employee liability cover is directly based on the activities undertaken by the employees concerned and how much of that work is undertaken. The level of data collated over the years by insurers has developed a rating system for most trades and occupations that produces immediate quotations.