For a limited company, employee insurance can make the difference between survival and collapse. It protects against the cost of compensation claims that could run into hundreds of thousands of pounds, ensures that any injured party will be properly provided for, and reduces the burden of legal wrangling that the company owners might otherwise have to cope with; in fact, it is so important that banks and investors often want to know that a company is fully insured before doing business with it.
Employers’ liability insurance
Every business has a legal duty to look after the health and safety of its employees. Employers’ liability insurance is designed to cover that situation when good planning is undone by bad luck and something is missed that results in an accident. If the business owners can show that they generally have a good safety record and take a responsible approach, they will not have to worry about insurers refusing to cover them or charging elevated premiums. To make sure the cover applies, however, employers will need to take their duty seriously and make sure that nothing is neglected.
Liability insurance means that if an employee is seriously hurt and needs money to deal with things such as the purchase of disability aids, they can get a lump sum award not limited by the company’s bank balance and the company will not go bankrupt in the process.
Employee liabilities and indemnity insurance
Limited company directors should also consider getting employee liabilities and indemnity insurance. This covers the cost of damages caused by employees, whether to customers, visitors or one another. It can apply if they cause harm through their actions or if harm occurs because they failed to do particular jobs for which they were responsible to an adequate standard.
Whilst this might sound like the employees’ lookout, it is standard practice for employers to take care of it, for very good reasons Firstly, it is part of providing a safe working environment where employees can relax and focus on the work they have to do. Secondly, most employees will not be rich; if they are uninsured an accident victim may choose to claim against the company instead. Even if other insurance covers the cost of this, it could potentially be damaging to the company’s reputation.
How likely are compensation cases?
When considering purchasing limited company employee insurance, it helps to be able to balance the cost against the risks. There were 212,000 serious workplace injuries in the UK during the financial year 2011/2012, and a total of 850,000 people per year suffer some kind of work-related injury or illness. The annual value of compensation claims is thought to be over £1 billion. There are approximately 1.15 million limited companies in the country, plus 500,000 partnerships and 2.8 million sole traders. This means that an accident is likely to happen at roughly one in six companies in any given year, with the cost of compensation depending to a large extent on how innately hazardous the type of work being done there is. Even in an office people can slip and break their necks, so insurance is the only way to be safe.
Date Published: December 29, 2013
Author: David Brown