UK Liability Insurance - In Plain
Being an employer or small business owner, you have a legal responsibility towards your employees,
customers and the general public. You could be held legally liable and risk being sued if an employee or a member
of the public suffers an injury because of your breach of duty or negligence. If their claim for personal injury
compensation is successful, you might also receive a bill from the NHS for refund of hospital treatment costs
(including ambulance costs should it be necessary).
In a basic form, liability insurance is designed to pay any compensation and legal costs that could
happen if a worker is discovered to be at fault. If you employ staff it is very likely that you will be required to
take out employers'
liability compulsory insurance (ELCI).
ELCI forces any employer carrying out business in the UK to insure their liability to their
employees for harm or disease suffered whilst in the course of their employment in the UK. Liability insurance
offers greater security to firms against costs which might result in financial problems, and to staff members that
resources will be on hand as compensation even if companies have become insolvent.
How liability insurance works
The price of an insurance policy - known as the premium - is normally calculated using a "book
rating". A book rating is worked out by starting with a base rate, which reflects the insurer's overheads and
signals their appetite for your particular type of business - if they want your type of business, the premium will
be cheaper than if they don't.
The premium is then modified to reflect the insurer's estimation of the level of risk attached to a
particular profession or industry area.
The price will be affected by factors such as any previous claims, the size of the perceived risk
and your approach to risk management.
The fewer claims that you have made and the safer your working environment, the cheaper your
premium should be.
Premiums also include calculations from other similar businesses by amalgamating both good and bad
- small businesses with a good record may be damaged by this. Your own approach to risk management plus your safety
record can lessen the effect of this.
For employers' liability, the risk to the insurance company is calculated whilst taking into
account the number of employees and the size of the company wages bill. In addition, there are further factors that
influence how risk is assessed.
For product and public liability the exposure risk is calculated on the turnover of your business
and factors including whether you carry out your business away from your normal place of work.
What public liability insurance covers
public liability insures against any awards of damages given to a member of the public following an injury or
damage to their property or belongings caused by you or your business. It also covers any related legal fees, costs
and expenses as well as costs of hospital treatment together with any associated ambulance costs that the National
Health Service might demand from you.
Policy costs depend on the type of business you run, the turnover of the business and how many
staff you employ.
Public liability insurance can be a complicated product and prospective clients must study
carefully all of the documentation to make sure that the insurance is right for their business.
Even if you work from home, if members of the public or customers meet you there, you may also want
to consider purchasing public liability insurance.
Some businesses, for example horse riding schools, are legally forced to have public liability
cover. You are also likely to discover that many of your potential or existing customers need evidence of current
public liability insurance cover prior to allowing you to work for them.
Many self-employed tradesmen or owners of small businesses will discover that there are liability
insurance products that are tailored to their particular trade. These products are found under a variety of labels
insurance , small business insurance or self employed liability insurance. These products should include a
number of individual parts including employers and public liability, together with a selection of office insurance,
legal expenses and professional indemnity.