Business Insurance Explained
What a thoroughly confusing subject !. There seems to be a whole range of online insurance products labelled public liability insurance, employers liability insurance and quite a few other varieties of liability insurance. There is considerably more uncertainty as to what exactly is optional and what what the laws of the land insist upon. The aim of this article is to simplify this type of insurance in order that we can all find a suitable product to safeguard our business against litigation from members of staff, clients or the general public. Let’s begin by describing some of the variations of liability insurance.
Employers Liability Insurance
An employer is responsible for the health and safety of their members of staff whilst they are at work. Your employees may be harmed at work or they, or your former members of staff, may become ill as a result of their endevours whilst working for you. They could attempt to sue you for damages if they think you are at fault. The Employers’ Liability (Compulsory Insurance) Act 1969 requires that you hold a certain level of insurance protection against any such claims.
Employers’ liability insurance lets you meet the cost of compensation for injuries or illness to your employee’s no matter if they happen on or off site. However, any injuries and illness as a result of car accidents that happen whilst your staff are on company business could be covered separately by your motor policy.
The National Health Service are likely to reclaim hospital treatment costs (including ambulance costs) whenever personal injury compensation is paid.
Employees suffering injury because of an employer’s negligence can seek damages even if the business should go into receivership or liquidation.
By law, employers in the United Kingdom are required to have ELCI (Employers Liability Insurance) and be insured for a minimum of £5 million. Most insurers offer a minimum of £10 million cover. ELCI must provide cover for all of your employees in the UK.
If your business is not a limited company, and you are the sole employee or you only employ close family members, you need not purchase employers liability insurance. Limited companies with only one employee, where that employee also owns 50 per cent or more of the shares in the company, are also not required to arrange compulsory Employers Liability Insurance.
Public Liability Insurance
Public Liability Insurance covers any damages awarded to somebody following damage to their property or an injury caused by you, your business or your staff. Furthermore it covers any related legal costs and expenses together with costs of hospital treatment (including ambulance costs) that the NHS might try to claim from you.
The cost of public liability insurance vary according to the type of business you run, your turnover and the number of employees you have.
Some businesses, eg horse riding schools, are legally forced to have public liability insurance. It is also likely that a proportion of your customers or potential customers need proof of you holding public liability insurance before they will allow you to do business with them.
Product Liability Insurance
When discussing PLI (Product Liability Insurance), the definition of a product is any physical item that is sold or given away.
Products must be “fit for purpose” under the Consumer Protection Act 1987. You’re legally responsible for any injury or damage that an item you supply might cause.
(If the product that you supply is faulty, claimants may attempt to claim from you initially, even if you did not manufacture it. You’ll be liable for compensation claims if:
- your business’ name is on the product - ie the manufacturer made it for your brand
- your company fixes, upgrades or otherwise modifies it
- you imported it from outside the European Union
- it is not obvious which company made the product
- the manufacturer is no longer in business
If none of the above applies, the manufacturer is liable - or the processor where the product involves parts from multiple manufacturers.
Property Owners Liability Insurance
Property owners’ liability insurance is designed to meet any costs and damages given to a member of the public should they suffer an injury as the result of an accident on, or linked to, your premises. This could include the cost of treatment in hospital and ambulance costs charged by the NHS, if someone is awarded personal injury compensation.
Generally, it is a sensible idea to ensure that property owners’ liability is included in your business insurance - you may find it is also included with your contents insurance policy.
Professional Indemnity Insurance
If you are in the business of selling your skills or knowledge, you might want to consider taking out professional indemnity insurance.
This protects your company against compensation claims brought by a client should you have made errors or are found to have been negligent in some or all of the services that were provided to them. Professional indemnity insurance will also cover any legal costs.
Most professionals carry professional indemnity cover. If you are an accountant, lawyer or financial adviser, then you must hold professional indemnity insurance. Professionals such as consultants, architects, advertising and PR agencies and designers often opt for such cover as well.
Business Insurance
Many owners of small businesses or self employed tradesmen will discover that there are liability insurance products designed for their particular trade. These products are sold under a number of labels such as self employed liability insurance, tradesmans insurance, small business insurance or business insurance. These offerings will normally include a variety of individual sections including employers and public liability, combined with appropriate sections of legal expenses, professional indemnity and office insurance. This type of business insurance should offer considerable savings when compared to buying the separate components.
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