Business insurance is one area where non-resident UK company founders often have blind spots. While UK companies are not required to hold most types of insurance, one type — Employers' Liability — is a legal requirement the moment you take on an employee. Understanding what is legally required, what is strongly recommended, and what your clients may contractually require, is essential for running a compliant UK company.
UK Business Insurance: Required vs Recommended
- Legally required: Employers' Liability Insurance (if you have employees)
- Legally required for regulated professions: Professional Indemnity
- Required by most corporate clients: Public Liability + Professional Indemnity
- Recommended for all company directors: Directors' & Officers' (D&O)
- Fine for missing EL insurance: Up to £2,500 per day
Employers' Liability Insurance (Legal Requirement)
Under the Employers' Liability (Compulsory Insurance) Act 1969, all UK businesses that employ people must hold a minimum of £5 million in Employers' Liability Insurance. In practice, most policies provide £10 million of cover.
EL insurance covers claims made by employees who suffer illness, injury or death arising from their work. It covers legal defence costs and any compensation awarded.
Who is considered an "employee" for EL purposes? The legal definition is broader than you might expect. It can include:
- Full-time and part-time permanent employees
- Temporary or seasonal workers
- Contractors working under your direction and control
- Apprentices and work experience placements
You are generally exempt from EL insurance if you are the sole director and sole employee and own at least 50% of the share capital. Once you hire your first employee, EL insurance is mandatory.
The certificate of EL insurance must be displayed at each place of business (or be accessible electronically). The fine for failing to hold EL insurance is up to £2,500 per day. Insurers are required to report EL policies to the Employers' Liability Tracing Office (ELTO) database.
Public Liability Insurance
Public Liability (PL) insurance is not legally required (except for certain sectors like entertainment events or some licensed premises), but it is contractually required by most corporate clients and many public sector procurement frameworks. PL covers claims made by third parties (customers, members of the public, suppliers) for property damage or personal injury caused by your business activities.
Standard cover levels: £1 million, £2 million, £5 million, or £10 million. Most small companies take £1m–£2m; corporate client contracts often require £5m–£10m. Premiums for £1m cover start from approximately £80–£200/year for low-risk office-based businesses.
Professional Indemnity Insurance
Professional Indemnity (PI) insurance covers claims arising from negligent advice, errors, omissions or failure to deliver professional services. It is legally required for:
- Solicitors (minimum £2m per claim regulated by the SRA)
- Financial advisers and wealth managers (FCA regulated)
- Architects (ARB registered)
- Accountants (many ICAEW/ACCA member firms)
- Chartered surveyors (RICS regulated)
For non-regulated businesses, PI is strongly recommended for:
- IT consultants and software developers
- Management consultants
- Marketing agencies and designers
- Any business providing advice or recommendations that clients rely on
PI policies are typically claims-made — they cover claims made during the policy period, not when the work was done. This means you should maintain PI cover for several years after completing work, as clients may raise claims late.
Directors' & Officers' Insurance
Directors' and Officers' (D&O) insurance protects individual directors and senior managers against personal liability claims. UK company directors can face personal claims from shareholders, HMRC, employees, creditors and regulators — entirely separately from claims against the company itself.
D&O insurance typically covers:
- Legal defence costs for regulatory investigations (Companies House, HMRC, FCA enquiries)
- Claims arising from alleged wrongful acts in the director's capacity
- Employment practice liability claims (discrimination, wrongful dismissal)
- Costs of defending disqualification proceedings
D&O cover is not legally required but is increasingly expected by investors, lenders and corporate clients. Premiums for small UK companies start from approximately £200–£600/year.
Other Cover to Consider
| Insurance Type | Who Needs It | What It Covers |
|---|---|---|
| Business interruption | Companies with physical premises | Revenue loss if operations are interrupted |
| Cyber liability | Any company holding customer data | Data breach costs, regulatory fines, cyber attack response |
| Product liability | Companies selling physical products | Claims from customers injured by defective products |
| Commercial vehicle | Company-owned vehicles | Legally required for any company vehicle used on UK roads |
| Key person | Companies dependent on a small number of individuals | Financial loss if a key person dies or becomes critically ill |
Insurance for E-Commerce & Import Businesses
Non-resident founders running UK e-commerce or import businesses should consider:
- Product liability insurance — if you sell physical goods (including via Amazon FBA), you are the importer of record and bear liability for product defects under UK consumer law. This applies even if you did not manufacture the product. Amazon requires sellers to hold product liability insurance for sales above £10,000/month.
- Goods in transit / marine cargo insurance — covers goods while being transported from overseas suppliers to UK warehouses or customers.
- Stock insurance — if you hold inventory in a UK warehouse (including Amazon FBA warehouses), standard FBA cover has limits; supplementary insurance may be needed for high-value stock.
Non-Resident Directors: What to Be Aware Of
Non-resident directors of UK companies face the same legal exposure as UK-resident directors under UK company law. D&O insurance is particularly valuable because:
- UK court judgments can be enforced in many countries under international treaties
- HMRC has enforcement powers extending to directors personally for unpaid PAYE and VAT in cases of deliberate non-compliance
- The cost of engaging UK legal counsel from overseas is very high — D&O cover typically includes legal defence costs
When arranging UK business insurance as a non-resident, disclose your location and business operations fully to the insurer. Failure to disclose material facts (including the director's country of residence and the nature of overseas operations) can invalidate a policy at the point of claim.
Register Your UK Company Today
1st Formations provides fast UK company registration with registered address services — the first step before arranging your UK business insurance. Once your company is registered, you will also need to set up a UK business bank account as a non-resident to receive client payments and pay insurance premiums.
Register a UK CompanyFrequently Asked Questions
What insurance is legally required for UK companies?
Employers' Liability Insurance is legally required if you have employees — minimum £5m cover. Vehicle insurance is required for company vehicles. Professional Indemnity is required for certain regulated professions (solicitors, FCA-authorised firms, architects).
Do I need EL insurance if I am the sole director with no employees?
Generally no — sole directors owning ≥50% of shares are usually exempt. Once you hire any employees (including some contractors), EL insurance becomes mandatory. Fine for non-compliance: up to £2,500 per day.
What is Professional Indemnity and who needs it?
PI covers claims for professional negligence, errors or omissions. Legally required for regulated professions; strongly recommended for consultants, IT professionals, designers and any advice-based business. PI policies are claims-made — maintain cover after project completion.
Do non-resident directors of UK companies need UK insurance?
Yes, if the company has UK employees or activities. D&O insurance is particularly valuable for non-residents — it covers legal defence costs for claims made against directors personally in UK courts, which can be very expensive to defend from overseas.