Employers indemnity insurance is almost always a loose name for employers liability insurance, which is the one liability cover UK law makes compulsory. The obligation starts the moment somebody works for you rather than for themselves, and the penalty is charged for every day traded without it.
The obligation
An employer must hold employers liability insurance to a statutory minimum limit from an authorised insurer, and must be able to produce the certificate. The penalty is a daily one, which means a gap of a few weeks is not a small matter, and enforcement looks at the working relationship rather than at the paperwork.
Who counts as an employee
Not only people on a payroll. Casual workers, labour only subcontractors, volunteers in some settings and family members working in the business can all count. A genuinely self employed contractor supplying their own tools, carrying their own insurance and free to send a substitute usually does not. The test is substance.
What it covers
Injury or illness suffered by an employee arising out of their work, and the cost of defending the claim. It is not health insurance and it does not pay because somebody is unwell; it answers where the employer's breach of duty caused the harm.
Questions people ask about employers indemnity insurance
Is employers liability compulsory?
Yes, from the moment anybody works for you rather than for themselves, to a statutory minimum limit, with a penalty for each day without it.
Do subcontractors count?
Labour only subcontractors usually do. A genuinely self employed contractor with their own tools, insurance and right of substitution usually does not.
Do I need it for one part time helper?
If they work for you, yes. There is no threshold below which the obligation does not apply.