Is employers’ liability insurance a legal requirement?

Yes, employers’ liability (EL) insurance is a legal requirement.

Article over, right? 

Not quite. While EL is a legal requirement, there’s a lot more to it than that. 

Depending on how you work and who you work with, you may not be required to have it.  

Not to mention how much cover you need if you do. And what happens if you’re caught without it when you should have it. 

Don’t worry, we’re going to cover all the ins and outs.

Why is employers' liability insurance a legal requirement? 

EL became a legal requirement in 1969 with the Employers’ Liability (Compulsory Insurance) Act.  

At the time, the government was facing pressure from employees. Many had been awarded compensation at court after being injured or falling ill at work. But not actually received any money because their employer couldn’t afford it. 

On top of that, employers were unhappy because the cost of compensation was pushing them into bankruptcy. 

The solution was to make EL mandatory for almost all businesses with employees.  

The new law also: 

• Set minimum cover amounts to make sure businesses were properly protected. 
• Required that employers display their insurance certificate somewhere employees can see it. 
• Standardised what EL covers (we’ll go into this more in the next section). 
• Created a list of authorised insurers to make sure businesses don’t get conned. 
• Set out a list of exemptions (businesses that don’t need to have EL). Including certain public bodies, businesses that only employ close family members etc. 

What is employers’ liability insurance? 

So, we know why EL is mandatory and that it protects businesses and their employees. But how does it do that? 

In a nutshell, it protects your business if an employee, or former employee, claims they were injured or became ill because of their work. 

It covers the costs of investigating and defending against a claim. Including your legal fees. 

It also pays any compensation you might owe, if you’re found to be at fault. 

Without EL, you’d have to fund all this yourself. When legal, defence, and compensation costs can easily rise into multiple millions of pounds, it’s easy to see why it’s become mandatory to have EL in the UK. 

What happens if I don’t have employers’ liability insurance? 

First, it’s important to say not every business needs to have EL. You can find all the exemptions in the Health and Safety Executive (HSE) guide. 

If you don’t have it when you should have, though, you could be faced with a hefty fine. Or even prosecution, depending on the circumstances. 

You can be fined up to £2,500 for each day you’re uninsured. That’s why it’s so important that you have EL in place as soon as you become an employer. 

There’s also a fine of up to £1,000 for not properly displaying your EL insurance certificate. Remember, it must be somewhere your employees can easily access or see it. 

A prominent place in the office, on your company intranet in an easy to find location, signposted in your employee handbook... anywhere that makes it easy for your team to find it. 

The HSE actively investigates breaches of EL law. Here’s an example of a company in Cheshire that was fined over £3,000 in 2026 for not having the right cover in place. 

How much employers’ liability cover do I need? 

Currently, the law requires that employers have a minimum of £5 million of EL cover from an authorised insurer. 

In practice, most insurers won’t offer less than £10 million. 

Why? Serious claims can be expensive. It’s common for them to cost more than £5 million, so insurers have decided to offer more by default. 

Some businesses may require more cover, but it’s rare. For the vast majority of businesses, £10 million is more than enough cover. 

Interested in what can affect the cost of EL? Our guide on what affects the cost of your employers’ liability insurance has all the info. 

Sensible protection 

Employers’ liability insurance is a legal requirement for almost all businesses with employees. But there’s a good reason for it.  

It doesn’t only protect your business from the financial hardship of legal costs and compensation. It also make sure your employees are properly compensated if they have an accident or fall ill at work.

Although it can be confusing to know whether or not you need it. And how much cover you need, if you do. That’s where we come in. We’re happy to talk through all things EL with you and make sure you have the right cover for your business. 

Give us a call on 0345 222 5391. Or take a look at our employers’ liability guide for more info. 

Image used under license from iStock.