Business insurance: what the law actually requires
Most UK businesses are legally required to hold exactly one insurance policy, employers' liability, and only from the moment they employ anyone. Motor insurance covering business use is the other legal requirement if vehicles are used for work. Everything else, public liability and professional indemnity included, is optional in law but frequently compulsory in practice, because councils, venues and client contracts demand it before you can do the work. Here is the legal line, the contractual line, and the order to buy in.
Employers' liability: the one the law demands
Employers' liability insurance becomes compulsory the moment you employ anyone, under the Employers' Liability (Compulsory Insurance) Act 1969. The legal minimum is £5 million of cover, though most policies are written at £10 million. The penalties are the sharpest in this whole area: up to £2,500 per day without cover, enforced by the HSE, plus a separate fine of up to £1,000 for failing to display or produce the certificate. Two exemptions matter. A company employing only its owner is exempt where that person holds 50% or more of the shares, and family businesses employing only close family members are exempt too, unless the family business is incorporated as a limited company, in which case the exemption falls away.
Public liability and professional indemnity: required by contracts, not law
Public liability insurance is not required by any law, but councils, venues, trades clients and commercial contracts demand it so routinely that most customer-facing businesses cannot trade without it;six providers from £5 a month are compared here. It covers injury to third parties and damage to their property. Professional indemnity works the same way one rung up: no general legal requirement, but mandatory for some regulated professions, including solicitors, financial advisers and members of some accountancy bodies, and demanded by many client contracts. It covers claims arising from advice or professional services. Three other covers earn one line each. Contents and equipment insurance replaces the kit you work with. Product liability covers harm caused by things you make or sell. Cyber insurance covers the fallout from breaches and attacks.
The order to buy them in
- Employers' liability, the day you hire. It is the only cover with a daily fine attached, so it goes first and it goes on time. If vehicles are used for work, business motor cover is equally non-negotiable: personal policies commonly exclude business use.
- Public liability, before you face the public. Buy it when a council, venue or client first asks, or earlier if your work puts you near other people's bodies or property.
- Professional indemnity, before you sell advice. Regulated professions have no choice; everyone else should let client contracts set the trigger.
- The optional layer, as risk justifies it. Contents, product liability and cyber are judgement calls: weigh what a loss would actually cost against the premium.
Questions people actually ask
Is business insurance a legal requirement in the UK?
Only employers' liability insurance is required by general law, under the Employers' Liability (Compulsory Insurance) Act 1969, and only once you employ someone. Motor insurance covering business use is also required if vehicles are used for work. Everything else, including public liability, is optional in law.
How much employers' liability cover do I need?
The legal minimum is £5 million, but most policies are written at £10 million as standard. The cover pays claims from employees injured or made ill through their work. You must also display or be able to produce the certificate.
What is the fine for not having employers' liability insurance?
Up to £2,500 per day without cover, enforced by the Health and Safety Executive. There is a separate fine of up to £1,000 for failing to display or produce the certificate. The daily rate means a few uninsured months can dwarf years of premiums.
Do sole traders need business insurance?
Not by general law, provided they employ nobody and do not use a vehicle for work. In practice many still need public liability, because councils, venues and trade clients routinely refuse to deal with anyone who cannot show a certificate. Personal motor policies commonly exclude business use, so check yours before driving to jobs.
Is public liability insurance compulsory?
No law requires it, but contracts frequently do: councils, venues, trades clients and commercial agreements often make cover a condition of doing the work. It pays claims for injury to third parties and damage to their property. Treat it as commercially compulsory for anything customer-facing.
Figures checked 4 July 2026; confirm details with the provider before applying. We may earn a commission through links on this page.