Professional indemnity insurance and public & employers' liability insurance are fundamentally different things. 
 
Professional indemnity insurance is a type of cover that protects you against legal claims for compensation by your clients if you harm them in some way via the provision of your services. This insurance provides a pot of money that pays out if you give a client bad advice, produce poor work or are negligent in your work in some way. 
 
Employers' liability insurance protects you against claims that a different group of stakeholders in your company might make - your staff. 
In the UK, employers are obliged by law to take out employers' liability cover. It’s a form of insurance that will pay out if an employee successfully makes a legal case against you. 
 
So, for instance, suppose that an employee tripped and fell at work and a tribunal concluded that it was your fault (legally speaking), with employers' liability insurance, the insurer would pay the compensation to the worker instead of you having to do so out of your pocket. 
 
It’s worth pointing out that the levels of compensation a court orders you to pay out can be considerable. Not only might you have to pay legal costs and direct compensation for the injuries, but also any potential medical bills and lost earnings. You may also have to pay ongoing costs if the injuries result in a permanent disability, in the worst case scenario. 

Why you need Professional Indemnity Insurance 

The need for professional indemnity insurance is probably higher today than at any other time in the past. Shifts in the economy and the growth in self-employment in some sectors mean that a higher number of professionals are exposed to legal risks. There’s the continual threat of claims being made against them by clients who lose out as a result of negligent work. 
 
Freelancers, contractors and consultants all give their clients information and services can get into trouble in all kinds of ways. An accountant, for instance, might make a mistake on a tax return leadings to an HMRC investigation which results in penalties for the client - though don't worry, this has not happened with us! 
 
Likewise, a freelance architect could produce plans for a building that don’t pass engineering standards, leading to enormous costs for contractors and owners downstream. Just like the accountant, the architect could face a legal claim for compensation by clients who’ve lost money as a result of their negligence. 
 
You might think that you’re safe from this kind of dispute because you have an excellent relationship with your clients, but don’t let personal niceties fool you - there’s always a risk that you’ll be dragged off to court the moment your actions lead to losses. 
 
Professional indemnity insurance is not a legal requirement in the UK. Some professional organisations, however, insist that you have this type of cover if you want to be a member. For example healthcare professionals, accountants, architects and some marketers must all have the cover in place, just in case there’s a dispute. 

Why you need Employers' Liability Insurance 

The reasoning behind taking out employers’ liability insurance is similar to the above. You never quite know when you might face a claim and end up with a large legal bill. 
 
As a business, you face an enormous number of regulations concerning employees. There are rules about workplace etiquette, the hours that people can work, the conditions in which they can work, and much, much more. 
 
The government knows that it is difficult for all firms, especially small businesses, to comply with all the regulations and remain competitive in today’s international marketplace. So instead of letting UK firms go to the wall, it forces them to take out employers’ liability insurance to cover the threat posed by its own regulations. 
For individual employers, what this means is simple: if there’s a dispute involving a worker, you’re covered by an insurer. You can continue your operations relatively unencumbered (unless you’ve done something criminal). 
 
Employers’ liability insurance therefore has become a necessary part of doing business. The threat of claims is real. If you have any number of employees, there’s a chance - however small - that harm will come to them at some point through your negligence.  
 
Instead of waiting for that day to arrive, it’s prudent to take out employers’ liability cover and protect yourself. There’s no point building a great business and then having it fail because you’ve been negligent in some way to your employees, whether intentional or not. 

Don't delay; get your insurance sorted sooner rather than later and take advantage of our discount code with Qdos Contractor! 

We can't stress enough the importance of getting your insurance sorted. Hopefully you will never have to deal with a claim of any type, but it just isn't worth the risk. Yes, it's another cost, but it's one worth investing in. 
 
There's good news for you though. We have partnered with Qdos Contractor for all your business insurance needs, and if you use this link here and speak to us so we can help you decide which insurance you need to take out, we can provide you with a 7.5% discount code! 
 
Feel free to get in touch to discuss further – book a call with Nicola, or drop us an email. We would love to help you with your insurance questions and worries. 
 
 
 
Written by 
 
Nicola J Sorrell 
- Effective Accounting 
 
Founder | Xero Champion | IR35 Expert 
Tagged as: Employer
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