Liability Insurance - In Plain Language
Tuesday, September 30th, 2008 by plrpro Subscribe To Our Feed
Being an employer or 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 claim for personal injury compensation is successful, you may also face a claim from the NHS for refund of hospital treatment costs (including the cost of providing an ambulance should it be necessary).
In its simplest form, liability insurance is formulated to pay any compensation and legal costs that might happen if an employer is found to be at fault. If you employ even a single member of staff it is almost certain that you will required to buy employers’ liability compulsory insurance (ELCI).
ELCI requires employers running a business in the UK to insure their liability to their staff for harm or illness sustained whilst in your employment in the UK. Liability insurance provides increased security to firms against penalties which could otherwise result in cash flow problems, and to staff members that resources will be on hand as compensation even if firms have gone bust.
How liability insurance works
The price of an insurance policy - known as the premium - is typically calculated using a “book rating”. A book rating is calculated by beginning with an initial charge, which reflects the insurer’s expenses and signals their desire for your particular type of business - if they are happy to provide cover to your profession, the cost will be cheaper than if they don’t.
The price is also calculated on the insurer’s estimate of the amount of risk attached to a particular industry or business area.
The price will be affected by factors including any previous claims, the insurance company’s perception of the risk involved and your approach to risk management.
The fewer claims that you have made and the safer your working environment, the lower the policy will 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 minimise the effect of this.
With employers’ liability, the exposure risk is assessed on the basis of the number of employees and the size of the company wages bill. Additionally, there are other initiatives that influence how risk is assessed.
For public and product liability the insurance risk is based on the turnover of your company and factors including whether you carry out your business away from your normal place of work.
What is covered by public liability insurance
UK Public liability insurance insures against any damages and costs awarded to someone following an injury or damage to their belongings or property caused by you or your business. Furthermore it covers any expenses, costs and related legal fees as well as costs of hospital treatment together with any associated ambulance costs that the NHS might 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 read carefully through all of the policy documents to ensure that the product matches their needs.
Even if you work from home, if customers or members of the public meet you there, you may also want to consider purchasing public liability insurance.
Some professions, for example horse riding schools, are legally forced to have public liability insurance. You are also likely to discover that some of your customers or potential customers require evidence of current public liability insurance before they will allow you to do business with them.
Many small business owners or self employed tradesmen will find that there are a variety of products that are designed to their business. These policies are sold under a variety of labels including business insurance, small business insurance or self employed liability insurance. These products will include a variety of individual parts including employers and public liability, combined with a combination of legal expenses, professional indemnity and office insurance.
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