After doing a bit of research into sponsoring foreign workers from a UK based company, I came across something interesting; according to the UK Border Association, a small business must have employer's liability insurance coverage for a minimum of £5 million, if they employ anyone. I found that fact by digging through the required documents necessary for a license to sponsor foreign workers: found here. (The first list of documents is for Start-ups, or companies that are younger than 18 months. They say that when applying for the license, one of the mandatory documents you must have is proof of Employers Liability Insurance coverage for a minimum of £5 million, although you have to scroll down the pdf to see it.)
At first, I couldn't believe that this is true. I mean, how could a micro-ISV require that much insurance coverage for 1-2 people, or just to hire one more person? Then I read this article that said: 200,000+ businesses are breaking the law in the UK by not having ELI. My question(s) is/are:
even at the level of just one employee (i.e., the founder), having EL insurance is sometimes necessary because when doing work for big companies, their standard contracts require say a million pounds of EL cover, and generally also a level of public liability (PL) insurance cover.
Note that if you have any equipment at your office (even at home) then you are going to want insurance cover for that, and you can usually get a standard business insurance package which gives you cover including EL & PL for a reasonable amount each month.
Came across http://www.simplybusiness.co.uk/ which may be handy to compare quotes (although I haven't used it myself).
I was told the same as is on Wikipedia now:
"In the United Kingdom Employers Liability Insurance is compulsory, unless the only employee is the owner of the company (who holds at least 50% of the shares)."
So yes, it's necessary if you have even one employee - and even in a one man business it's sometimes desirable.
If it's any use, the cheapest supplier I found was Hiscox - £2 million / cover for around £40 a month.