Liability Insurance UK – A Mystery Explained
If you are an employer or small business owner, you have a legal responsibility towards your customers, employees and the general public. You might be held liable and might be sued if a member of the public or an employee is harmed because of your breach of duty or negligence. If their personal injury claim is successful, you could also receive a claim from the National Health Service for the costs of hospital treatment (including ambulance costs if and when appropriate).
In a basic form, liability insurance is formulated to pay any compensation and legal costs that could happen if a worker is discovered to be at fault. If you employ even one member of staff it is almost certain that you will required to buy employers’ liability compulsory insurance (ELCI).
ELCI demands that any employer running a business in the UK to provide insurance against their liability to their employees for bodily injury or illness sustained whilst in your employment in the UK. It provides increased peace of mind to employers against penalties and legal costs which could result in financial problems, and to staff members that resources will be there for compensation even if companies have become insolvent.
How liability insurance works
The cost of insurance – known as the premium – is normally worked out utilising a “book rating”. It is worked out by starting with an initial charge, which includes the insurer’s costs and reflects their desire for your profession – if they want your type of business, the premium will be cheaper than if they don’t.
The price is then modified to reflect the insurance company’s estimate of the amount of risk related to a particular industry or business area.
The price will be adjusted by things 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.
Prices also include results from other similar businesses by amalgamating both good and bad – a small business with a good record may be adversely affected by this. Your own approach to risk management plus your safety record can lessen the effect of this.
With employers’ liability, the risk to the insurer is calculated whilst taking into account the number of members of staff and the size of the payroll. In addition, there are other initiatives that influence how risk is assessed.
For product and public liability the exposure risk is calculated on the turnover of your company and other items including whether you carry out your business away from your normal place of work.
What public liability insurance covers
UK Public liability insurance covers any awards of damages given to someone because of damage to their property or an injury caused by you or your business. Furthermore it covers any costs, expenses and related legal fees as well as charges for hospital treatment (including ambulance costs) that the government may claim from you.
Premiums depend on your line of business, the turnover of the business and the number of employees you have.
Public liability insurance is a complex product and prospective clients should study carefully all of the policy documents to make sure that the product is right for their business.
Even if you work from home, if customers or members of the public meet you there, you should probably think about taking out public liability insurance.
Some businesses, for example horse riding establishments, are legally forced to have public liability cover. You are also likely to discover that many of your potential or existing customers request evidence of current public liability cover before they will allow you to do business with them.
Many small business owners or self employed tradesmen will discover that there are liability insurance products that are designed to their particular trade. These policies are sold under a variety of labels such as self employed liability insurance, business insurance or small business insurance. These policies will include a variety of individual parts including employers and public liability, together with a selection of legal expenses, professional indemnity and office insurance.
