What is the difference between employers' liability and professional indemnity insurance?
Employer's liability and professional indemnity protect against distinct risks:
- Employers' liability Insurance: is designed to protect businesses against claims from employees who suffer injuries or illnesses while on the job. It's a legal requirement in the UK, and it covers the costs of legal defence and compensation payouts to employees.
- Professional indemnity insurance: on the other hand, is meant to protect professionals and businesses that provide services or advice from claims of professional negligence, errors, or omissions. It covers legal costs and compensation claims made by clients or third parties for financial loss due to your services or advice.
What is employers’ liability insurance?
Employers’ liability insurance is a type of insurance coverage that protects you as an employer from facing costly financial claims associated with employee injuries or illnesses that occur as a result of their work.
Typically, this type of insurance is a legal requirement for most businesses that employ staff in the UK. It is designed to protect both the employer and employee in the event of an accident or illness.
How does employers’ liability insurance protect me?
As a business owner with staff, you are responsible for making sure the safety and well-being of your employees are well taken care of. Should something go wrong, and one of your employees suffers an injury or illness as a result of their work, employers’ liability insurance covers the costs associated with legal fees, compensation claims, and medical expenses that may arise.
This can include injuries caused by machinery or tools, slip and fall accidents, and long-term illnesses caused by exposure to hazardous materials.
Without employers’ liability insurance, you could face hefty financial losses. You may be ordered to pay your employee’s medical bills and compensation on top of a fine for not having employer’s liability insurance in place in the first place.
This type of scenario could lead to serious damage to your business reputation and a possible closure.
Employers’ liability insurance acts as a safety net for both you as an employer and for your employees by making sure that employees are appropriately compensated for their injuries or illnesses while protecting employers from financial losses.
What is professional indemnity insurance?
Some businesses lend their skill and expertise to solve their client problems. If you are hired for this reason, you will likely need professional indemnity insurance.
Claims covered by professional indemnity insurance arise from clients or customers alleging that your business provided inadequate or incorrect advice that either failed to meet professional standards causing a financial loss or an injury.
Consider the service that your business provides - could a customer or client be dissatisfied enough to consider making a legal claim?
How can professional indemnity insurance protect me?
In the event of such a claim being made against your business, professional indemnity insurance will cover the associate legal defence fees as well as compensation payouts if you’re found liable.
If you’re running a business without professional indemnity insurance, your business risks facing significant financial losses if a client or customer files a claim alleging professional negligence.
As well as any potential financial losses, your business could also face legal action, causing damage to its reputation.
Professional indemnity insurance vs employers' liability insurance
Professional indemnity and employers’ liability insurance are legal covers. If a certain type of claim is brought against your business, these covers will pay for your legal defence and compensation payouts if due.
It isn’t a question of “professional indemnity insurance vs employers liability insurance”. It is more about your business activities, which will determine whether you need one, the other or both.
Remember, employer’s liability insurance is a legal requirement for most UK businesses. Check whether you are subject to this law on the government website.
If no one has ever asked you to have professional indemnity insurance, that doesn’t mean you shouldn’t consider it to protect your business.