Business insurance: liability insurance and professional indemnity
19th November 2020
By Lyndsey Hall
Read time: 3 minutes
Insuring your business: part four
Welcome back to our blog series on business protection. If you missed parts one, two and three, head over and give them a quick read now.
Previously, we looked at basic and additional insurance for your business. This time we’re focusing on liability insurance and professional indemnities that some businesses may need to take out to ensure they’re adequately protected.
Under the law, a business has certain duties towards its employees as well as to its customers and the general public. If it neglects its responsibilities or ignores its duties, then the business could be deemed legally liable as a consequence for any injury or illness sustained by either a member of staff or of the public. Liability insurance is designed to cover the legal costs and the compensation that might be incurred were the business to be sued and judged at fault by a court or tribunal.
Employers' liability insurance
Employers' liability insurance is compulsory for any business that employs staff. The aim is to provide the employer with cover to pay for any compensation or legal costs that arise as a result of a workplace injury or illness suffered by an employee that is deemed the fault of the employer.
For the purposes of employers' liability insurance, a worker is regarded as an employee if the business takes tax and national insurance from their salary; if the business is able to dictate when and where and how they work; and if the worker is unable to employ a stand-in when they themselves cannot do the work.
The law on employers' liability insurance says that an employer must be insured for a minimum of £5 million, although most policies offer cover of £10 million. The Health and Safety Executive has the power to fine a business up to £2,500 for every day that it lacks cover.
You can also be fined £1,000 if you do not display your employers' liability insurance certificate or refuse to make it available to inspectors when they ask.
Only authorised insurers can provide employers' liability insurance. A copy of the policy must be displayed prominently in the workplace so that staff can read it; each copy must be retained for a minimum of 40 years.
Businesses should take care to offer their employees the protection that the law demands. They should also follow and implement the instructions of their insurers. Failure to do either could mean that the insurer may withhold payment in the event of a claim.
Public liability insurance
Many businesses have regular contact with customers or members of the public. Customers might visit the business, for example, or the business might need to visit its customers. Public liability insurance is intended to cover any awards that are made against a business for any personal injuries or damage to property for which it might be responsible. The insurance also covers the legal costs and expenses involved in defending a business in the case of any claims for an award.
Public liability is by and large voluntary, although a few types of business must take out cover.
Businesses that visit clients should make sure that their policy provides both on- and off-site protection. As well as businesses that operate from a shop or office, those that are run from home might also need public liability insurance if clients are in the habit of visiting.
The cost of the premium will be determined by the nature of the business, the turnover and the number of staff employed.
As with all policies, it is wise not to under-insure, since legal fees and compensation awards can be high. Any policy should be kept under review so that it adequately reflects any changes in the business and the scale of risk that those changes introduced.
Next time, we’ll look at some other types of liability insurance your business may require in order to be adequately covered.
Do you have appropriate business protection in place? If you’d like to discuss your existing provision and get an independent review with suggestions for insuring your business, get in touch with us or visit our financial services company website, KWFS.online.