Glossary of insurance terms
Employers’ Liability Insurance
The Employers Liability (Compulsory Insurance) Act 1969 requires all employers, unless they are exempt, to have at least £5million of Employers Liability Insurance with an approved Insurer to protect their business from claims from employees for accidents or sickness caused through work. In practice most insurers give £10million.
The law was amended with effect from 28th February 2005 to exempt very small companies that employ only their owner (see the Employers Liability (Compulsory Insurance) (Amendment) Regulations 2004 SI 2004/2882). The Department of Work and Pensions confirmed that if a limited company employs only the owner and the owner owns more than 50% of the issued share capital, then the company is exempt.
As a freelance contractor operating outside IR35 you are likely to have substitution clauses in your contracts. Without Employers’ Liability Insurance, you cannot fulfil this clause without breaking the law. NES Group requires you to have this insurance cover in place. Full details can be read in the Health & Safety Executive’s ‘Guide to Employers’ by clicking HERE [PDF].
Public Liability Insurance
Whilst Public Liability Insurance is not a statutory requirement, we strongly recommend you maintain an appropriate policy to cover you for you legal liability for accidents to persons you may interact with at the client’s workplace or members of the public as a result of your business activities. It also covers for damage to property and Legal Costs of defending yourself against a claim from a third party. It is voluntary for most businesses but could save you a lot of money in the long term. However it is mandatory as part of your contract with NES Group as most clients demand such insurance to be in place.
Professional Indemnity Insurance
Professional Indemnity Insurance protects your business against its legal liability for losses suffered by clients as a result of any negligent advice you give or mistakes made in your work. It is legally required in certain professions such as Law, Accountancy and Financial Services.
It is very common in other areas such as management and computer consultancy, publishing, engineering and design. If you work in a professional capacity or provide any advice, undertake design work etc, NES Group clients require contractors to maintain Professional Indemnity Insurance of at least £1million for each and every claim. It is therefore a condition of your contract with NES Group.
Run Off Cover
Professional Indemnity Cover works on a ‘Claims Made’ basis and so when you cease trading, retire or take a permanent job it is wise to have ‘run off’ cover for a period of time after your policy has expired to protect you for any claims that could be made for the work you carried out previously.