Employers’ liability insurance

A straightforward guide for UK employers

Employers’ liability insurance protects UK businesses if an employee is injured or becomes ill because of their work. It pays compensation and legal costs when your business is held responsible. For most employers in Great Britain, it is not optional - it is a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969, with a minimum cover of £5 million.

The need is real. UK organisations reported over 2 million workplace injuries and illnesses recently, and more than forty thousand new employers’ liability claims were registered in a single year. Settlements can take years and claims can reopen, so the financial tail is long. Around 1 in 45 injured or ill employees successfully sue their employer, which makes robust cover and good safety practices equally important.

Not having valid cover can be expensive. Businesses can face fines up to £2,500 per day without insurance, plus penalties for not displaying the certificate. Despite this, a notable share of SMEs have risked going without compulsory cover, exposing themselves to fines and claims they would need to fund themselves.

Work is changing too. Hybrid and remote setups create risks in home offices, and mental health claims linked to workplace stress are growing. Many ELI policies now respond to these newer exposures, though terms vary by insurer. This guide sets out what the insurance covers, typical costs, and how to buy safely so you can protect your people and your business with confidence.

Insurance can protect finances - but only when you understand what is and is not covered.

Clear information helps you choose cover that genuinely fits your needs.

What is covered - and how a claim usually works

Employers’ liability insurance generally covers compensation, claimant legal fees, and your defence costs if an employee is injured or becomes ill because of their work. Cover usually applies to full-time, part-time, temporary, and seasonal staff. Many policies also extend to volunteers and labour-only subcontractors if you supervise or direct their work.

Typical scenarios include a slip in a warehouse, a repetitive strain injury in an office, a fall on a site, or an illness arising from workplace exposure. With hybrid work, injuries in a home office during working hours may be included. Increasingly, policies respond to recognised psychological injuries tied to work-related stress, though evidence requirements and definitions differ.

Exclusions are important. Criminal or deliberate acts are not covered. Claims unrelated to work activities will not be covered. Fines and penalties are not paid by your insurer. Some illnesses with long latency may face dispute over when the injury occurred or which policy year should respond. You must also meet your health and safety duties - serious breaches can complicate claims and may affect recoveries.

When a claim arises, the employee or their representative usually notifies you, or a formal letter of claim arrives. You should inform your insurer immediately and avoid admitting liability. The insurer investigates, appoints solicitors, manages evidence, and negotiates settlement where appropriate. Given that many cases take years to resolve, policies are written on an occurrence basis, so the policy in force at the time of the incident generally responds.

Who benefits most - and when it may not be needed

Any UK business that employs people in England, Scotland, or Wales almost certainly needs this cover by law. That includes limited companies, partnerships, sole traders with employees, charities, and clubs. Even if you only have one employee, you will likely need cover. Directors may count as employees, and unpaid helpers can create exposure if you control their work.

Firms in higher-risk sectors such as construction, manufacturing, logistics, agriculture, and care homes face greater injury frequency and more severe claims, so ELI is essential. Office-based businesses still benefit, as claims can arise from slips, trips, faulty equipment, or stress-related issues.

If you are a sole trader with no employees and no labour-only subcontractors under your control, you may not need ELI. However, requirements can be nuanced, so check your status carefully before assuming you are exempt.

Choosing a level of protection

1. Basic - legal minimum compliance

   • £5 million limit of indemnity, meeting the statutory minimum.
   • Suitable for very small, low-risk firms with limited payroll and simple operations.
   • Few extensions - may exclude volunteers or specific non-standard activities. Excess is often minimal or nil on bodily injury.

2. Standard - balanced cover for most SMEs

   • £10 million limit is common and often required by clients or contracts.
   • Broader definitions of employee, including temporary staff and volunteers under your control.
   • Can add retroactive cover where appropriate and include legal defence costs in addition to the limit.

3. Enhanced - higher limits and wider terms

   • £15 million to £25 million or more, often layered through excess policies.
   • Useful for multi-site operations, hazardous work, or where client contracts mandate higher limits.
   • May include additional crisis support, rehabilitation services, and improved claims reporting tools.

4. Optional add-ons and allied covers

   • Public liability - protects against third-party injury or property damage claims not involving employees.
   • Directors and officers - protects individuals against management liability claims.
   • Business interruption - helps with lost income after an insured event, though not for injury claims themselves.
   • Risk management services - training, audits, and online tools to reduce incidents and improve pricing over time.

Aim for the limit your contracts and risk profile demand - not just the legal minimum.

Price ranges and what shapes your premium

Prices vary by insurer. Expect economies of scale - the per-employee rate usually falls as your workforce grows. Comprehensive risk information and demonstrable safety improvements can materially affect the quote you receive.

Can you apply - and what insurers need to see

Most UK businesses with employees can obtain cover. Insurers will ask about your legal entity, trading address, activities, turnover, payroll split by role, claims history, and health and safety practices. They may request risk assessments, training records, method statements, and evidence of equipment maintenance. If you use contractors, you may need to confirm control, supervision, and that they carry their own insurance.

Common reasons for decline include undisclosed hazardous activities, poor or deteriorating claims history, inadequate health and safety management, or incomplete disclosures about your operations. High-risk work can still be insured, but it may require specialist markets or higher premiums. Being accurate and transparent at quotation stage is essential - non-disclosure can invalidate cover.

From quote to claim - the simple path

1. Gather details on activities, payroll split, and claims over the last 5 years.
2. Complete a clear proposal form and disclose all material information accurately.
3. Request quotes for suitable limits - often £10 million or higher.
4. Compare terms, exclusions, and warranties - not just headline price.
5. Purchase the policy and display your certificate where staff can see it.
6. Implement risk improvements promised during quoting to support pricing.
7. Report incidents promptly, keep records, and follow your insurer’s guidance.
8. Review cover and limits at renewal or when your workforce changes.

The upsides and the trade-offs

Key checks before you commit

Review the policy schedule carefully - confirm the limit of indemnity, any inner limits, and whether legal costs are in addition to or within the limit. Understand exclusions that matter to your work, such as specific hazardous activities or jurisdictions. Check any excess and when it applies. Verify definitions of employee, especially for volunteers, temporary workers, and labour-only subcontractors.

Ask about requirements you must meet throughout the policy term - warranties, risk improvements, training records, and incident reporting timelines. Confirm how hybrid work and stress-related claims are treated. Note that renewal terms can change if your payroll, claim experience, or activities shift. Keep your insurance certificate displayed and accessible to regulators and employees.

Alternatives and related protection

1. Public liability insurance - covers third-party injury or property damage that does not involve employees. Essential for most customer-facing businesses.
2. Directors and officers insurance - protects directors and officers against management liability claims from regulators, investors, or creditors.
3. Professional indemnity insurance - covers negligent advice or design, common for consultants and technical services.
4. Group personal accident - pays set benefits to injured employees regardless of legal liability, aiding recovery.
5. Business interruption insurance - helps replace lost income after insured physical damage disrupts trading.

Frequently asked questions

Q: Is employers’ liability insurance compulsory in the UK? A: For most employers in Great Britain it is a legal requirement. The minimum limit is £5 million, though many businesses carry £10 million. Failing to hold cover can trigger daily fines.

Q: How much does it cost per employee? A: Costs vary by role and risk. Office-based roles average around £61 per employee annually. Physical roles, such as construction, average about £213. Larger headcounts usually benefit from lower unit rates.

Q: Does it cover remote and hybrid workers? A: Many policies treat injuries sustained while working from home similarly to office incidents, provided work activities are the cause. Conduct risk assessments and supply safe equipment to reduce disputes.

Q: Are mental health claims covered? A: Some policies respond to recognised psychological injuries linked to work-related stress. Coverage depends on definitions, evidence, and causation. Always check wording and seek clarification before purchase.

Q: What happens if I do not display the certificate? A: You can be fined for not displaying your certificate to employees or failing to provide it to inspectors. Display it prominently and store digital copies for quick access.

Q: Why do claims take so long to settle? A: Injury and illness claims often involve complex evidence, medical assessments, and liability disputes. Cases can run for years and sometimes reopen, which is why good documentation is vital.

Q: Can I reduce my premium? A: Improve health and safety, keep accurate training and maintenance records, and provide complete disclosures. In 2025 the market is more competitive, so shop around for terms that fit your risk.

What to do next

If you employ staff in the UK, check whether your current policy is valid, adequate, and displayed correctly. Review your workforce mix, risk controls, and required limit. Compare quotes from reputable insurers, paying close attention to definitions, exclusions, and claims support. Take your time - the right cover should fit your operations and budget without gaps.

Important disclaimer

This guide provides general information only and is not personal financial advice. Policy terms vary by insurer and individual circumstances. Always read the policy wording and schedule carefully, and confirm the cover, exclusions, and obligations that apply to your business.