What Does Employers’ Liability Insurance Cover?

Employers’ liability insurance covers the compensation you are legally liable to pay if an employee is injured or becomes ill because of their work for you, along with the legal costs of dealing with the claim. Most employers in Great Britain must hold it by law, with at least £5 million of cover.

It protects the business against claims from its own staff. It does not cover claims from customers or the public, damage to your own property, or road accidents. The sections below set out what it pays for, who it treats as an employee, what sits outside it and the rules you have to follow.

What does employers’ liability insurance pay for?

GOV.UK says the insurance helps you pay compensation if an employee is injured or becomes ill because of the work they do for you. The Health and Safety Executive (HSE) guide for employers adds that this applies whether the injury or illness happens on or off site.

A claim typically includes:

• compensation (damages) to the employee for the injury or illness
• the employee’s legal costs, if you are found liable
• your own costs of defending the claim

HSE points out that the £5 million legal minimum includes costs, which is one reason employers often take more. HSE notes that most insurers offer at least £10 million.

Illness claims can come many years after the work was done. HSE notes that some diseases appear decades after exposure, which is why records of old policies are worth keeping.

Who counts as an employee for this cover?

The law applies to people you employ under a contract of service or apprenticeship. HSE says the real nature of the relationship decides this, not the job title. In practice that means:

• Employees and apprentices are included, whether full time or part time.
• Unpaid students and school pupils on work experience are usually covered by an existing policy, according to HSE, but you should tell your insurer about long term arrangements or work outside your usual business.
• Volunteers are usually covered too, according to the ABI’s guidance for voluntary organisations, which advises checking that the policy covers everyone who works with you.
• Self employed contractors may not need to be covered if they genuinely work as independent contractors, though HSE warns they can still be treated as employees in some situations.

If you are unsure about someone’s status, GOV.UK has an employment status checker. Our guide to employers’ liability insurance for one employee covers small employers in more detail.

What does it not cover?

• Claims from the public or other businesses. HSE explains that these are covered by public liability insurance, which does not cover claims by employees. Our comparison of employers’ liability and public liability explains where the boundary sits.
• Road accidents. HSE says injuries and illness from motor accidents may be covered separately by your motor insurance.
• Your own property and lost income. These need property and business interruption cover.
• Fines and prosecution costs. Whether these are covered depends on the policy wording, so check it if a health and safety prosecution is a concern.

Which employers are exempt?

GOV.UK and HSE list a small number of exemptions. You do not need employers’ liability insurance if:

• all of your employees are closely related to you, such as a spouse, civil partner, parent, child, grandparent, sibling, half sibling or step relative. HSE says this does not apply if the family business is a limited company
• your company employs only its owner, and that person owns 50% or more of the issued share capital
• you only employ someone based outside England, Scotland and Wales
• you are one of most public organisations, including government departments and agencies

A limited company with one director who owns all the shares and has no other staff is a common example of an exempt business. Once a second person is taken on, the exemption usually falls away. Our page on employers’ liability insurance requirements sets out the rules in full.

What are the certificate rules and penalties?

You must display a copy of your certificate where employees can easily read it. HSE says that since 1 October 2008 you can display it electronically, provided employees know how and where to find it. GOV.UK gives the workplace, your website or your intranet as examples.

The penalties are set out on GOV.UK:

• up to £2,500 for each day you are not properly insured
• up to £1,000 if you do not display your certificate or show it to an inspector when asked

Since 1 October 2008 there has been no legal requirement to keep old certificates. HSE still strongly advises keeping as complete a record as possible because disease claims can surface decades later. Our page on the Employers’ Liability Tracing Office explains how old policies can be traced when a former employer cannot be found.

Can an insurer refuse to pay a claim?

The law limits how an insurer can avoid a valid claim. HSE explains that an insurer cannot refuse payment purely because you failed to provide reasonable protection for employees, failed to keep required records or failed to meet other legal requirements. It also cannot impose conditions that make you, your employee or your former employee pay part of any claim.

That protects the employee, not necessarily the employer. HSE says that if the insurer believes your failure to meet health and safety duties led to the claim, the policy may let the insurer sue you to recover the compensation it paid. Good health and safety records, risk assessments and accident reporting under RIDDOR all help here.

What affects the cost of employers’ liability insurance?

We do not quote typical prices because they vary so much. The main things insurers look at are:

• the type of work your staff do, with manual and site work rated higher than office work
• your total wage roll and the number of employees
• your claims history and your health and safety arrangements
• whether you use labour only subcontractors who may count as employees

Employers’ liability is often bought alongside public liability. See our page on public and employers’ liability insurance.

Question	Short answer
Is it compulsory?	Yes, for most employers in England, Scotland and Wales
Minimum cover	£5 million, including costs
What it covers	Compensation and costs when an employee is injured or made ill by their work
What it does not cover	Claims by the public, motor accidents, your own property
Penalty for no cover	Up to £2,500 for each day without proper insurance
Penalty for not displaying the certificate	Up to £1,000
Keeping old certificates	Not required since 1 October 2008, but strongly advised

Example. Tom runs a small joinery workshop with two employees. One of them injures a hand on a bench saw and makes a claim, saying the guard was faulty. Tom’s employers’ liability insurer handles the claim, pays the compensation and legal costs and deals with the employee’s solicitor. Later the insurer finds that the guard had been reported broken weeks earlier and not repaired. The employee is still paid in full, but the policy wording allows the insurer to try to recover some of the cost from Tom.

If you employ staff and want us to look for cover, ask us for a quote or call 01795 841 310, Monday to Friday 9am to 5pm.

Frequently asked questions

Does employers’ liability insurance cover directors?

It covers people employed under a contract of service, so it depends on how the director works for the company. The exemption for a company whose only employee owns 50% or more of the shares means a sole director company with no other staff does not need it.

Do I need employers’ liability insurance for casual or temporary staff?

Usually yes. The law looks at whether there is a contract of service, not whether the work is permanent. So temporary, seasonal and part time staff on a contract of service count in the same way as permanent staff.

Does it cover stress and mental health claims?

The cover is for injury or illness caused by work. Whether a particular stress or mental health claim succeeds depends on the facts and on the law, and how the policy responds depends on its wording, so check it if this is a concern in your sector.

Is employers’ liability the same as public liability?

No. Employers’ liability covers your own staff. Public liability covers members of the public and other businesses. See whether public liability insurance is a legal requirement for how the two differ in law.

What happens if I already had an accident before taking out cover?

How a policy treats an injury that happened before it started depends on its wording, so do not assume a new policy will pick it up. GOV.UK says you must get cover as soon as you become an employer, which avoids the gap.

Sources

• GOV.UK: Employers liability insurance
• HSE: Hse40
• ABI: Voluntary organisations and insurance

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 10 November 2026. Solar Protect is the trading name of Solar Insurance Services (Medway) Limited, authorised and regulated by the Financial Conduct Authority. This page is general information, not personal advice.