Blog

Steps to Perform Online Banking with Chime Bank

Have you considered the convenience of online banking? A few years ago, I moved to a web-based bank and the benefit has been apparent ever since. Online banking is not only handy but it’s often more cost-effective as well.

Many online banks, unlike physical ones, don’t charge numerous fees. As they don’t have to incur costs such as branch maintenance, employee salaries, and various resources, it enables them to offer customers better rates and conditions.

A new player on the scene is Chime, a digital-only bank that allows its members to manage their finances from anywhere, freeing them from the hassles of in-person banking. A number of people have migrated to Chime’s digital platform for their financial needs.

CHIME OVERVIEW

Established by Ryan King and Chris Britt, Chime aims to provide a user-friendly banking experience that offers members relief and assurance. The platform has been lauded as one of the top new financial apps by Nerd Wallet in 2017.

Chime provides both checking and savings accounts options along with a bank card, with member funds insured by the FDIC. One of the standout features of Chime is its simplicity. It does not charge any monthly or overdraft fees.

There’s no convoluted terminology or hidden conditions to deal with. But how does Chime operate these facilities without charging anything? Simple. Chime’s objective is to help its members prosper without imposing unnecessary fees. Each time you use your Chime debit card, Chime earns a small commission from Visa, paid by the merchant.

Being a mobile banking app, Chime provides members complete control over their finances without reliance on banking personnel.

Chime allows you to choose between a checking and a savings account. Let’s break down some of the features:

SPENDING ACCOUNT

If you wish to use Chime for regular expenditure, this is a good choice. This account offers a free debit card for transactions and lets you access over 38,000+ ATMs without any charges. It also provides daily balance updates and the ability to prevent debit card transactions at any time in case of misplacement or unauthorized charges.

Depositing a check? It’s made easy with Chime’s app, no bank visits needed. Plus, if you set up direct deposit, you can avail of perks like receiving pay up to 2 days earlier. Chime is also compatible with other mobile payment options like Apple Pay and Google Pay. There’s no unexpected fee, apart from a $2.50 out-of-network fee that can be avoided by using the available fee-free ATMs.

SAVINGS ACCOUNT

Looking to boost your savings? The average American has less than $400 in savings, largely due to lack of priority given to savings. It’s also effortful for many to make saving a habit.

Chime’s savings account option aims to solve these issues by offering automated savings so that you’re constantly adding to your savings, effortlessly. You can either save a percentage of your paycheck directly or round up your purchases to save more. This facilitates steady savings without having to put too much thought into it.

PROS AND CONS

Chime gets a nod for its simplicity and transparency. The entire process can be managed from a single app, saving you from waiting on customer service or queuing in a bank. Early direct deposit and access to numerous fee-free ATMs are among the advantages. The automated savings feature is another standout.

However, Chime doesn’t offer interest on savings, which means a possible loss of extra earnings from significant savings. Yet, it is still a viable option for short-term savings and for inculcating a habit of saving money. Other online banks offer better interest rates.

Additionally, Chime doesn’t provide checks, and mobile check deposits might pose an issue for those unaccustomed to it. Luckily, this can be bypassed by setting up direct deposit.

SIGN-UP PROCESS

If the idea of online banking with Chime appeals to you, getting on board is easy and quick. It doesn’t impact your credit score and only requires a few basic details to get you started. You need to be a U.S. resident and over 18 years old.

Haven’t tried online banking yet? Share your thoughts on Chime in the comments below!

February 3, 2025
Deciding Whether to Buy or Rent: A Guide

The common adage implies that purchasing a property is always superior to renting, since it allows you to build equity rather than simply “wasting” money on rent. However, the recent plunge in the housing market offers a clear lesson: buying a house isn’t the best option for everyone.

The decision to buy a house is a momentous one, likely the most significant decision you’ll ever face. It requires careful thought, considering it’s likely to be among the largest investments you’ll ever make. Homeownership can be a smart financial move and an effective way to accumulate equity if you land a fantastic deal. However, it can morph into a financial burden if you rush into the purchase prematurely.

During my tenure at a mortgage brokerage, I encountered numerous clients who I suspected were on a fast track to foreclosure. Some had been swept up in the allure of shiny appliances and modern renovating, while others hoped to profit quickly from investing in rental properties. However, buying property isn’t an easy route to quick financial gains.

At times, it’s more practical to continue renting rather than leaping into homeownership. It’s crucial to remember that the ‘right’ decision is one that most effectively addresses your needs and circumstances.

If you’re wrestling with the choice between buying or renting, consider the following factors.

A home is an investment, likely the largest one you’ll ever make. Contrary to investing in a retirement account or a savings account, homeownership involves committing your resources to an asset that lacks liquidity.

Moreover, homeownership equates to a considerable responsibility. Once purchased, a house remains stationary – you’re tied to its location, issues, neighbors, and design. Relocation or changes in your personal life could leave you stuck with an unwanted property. Selling a house demands time, effort, and money. The process of showcasing your house, staging open houses, and maintaining its appeal is not conducive if you need to sell your house urgently.

You might consider renting out your home in such situations, but unexpectedly becoming a landlord can be challenging, especially if you’re relocating. Selling a house bears no resemblance to selling a car; it’s a lengthier, more involved process.

Renting may come with a hefty price tag, but it provides flexibility. Your rent covers costs beyond mere housing – you’re also paying for maintenance, landlord assistance, and the liberty to move out whenever you desire. Renting accommodates a transient lifestyle and supports quickly adapting to changing trends or personal preferences.

Nevertheless, renting brings its share of challenges. Adjustments to rental properties are usually limited, sometimes even prohibiting painting. Also, rented properties may require sharing walls with potentially unlikable neighbors. Furthermore, rent prices often increase annually, potentially compelling you to relocate or agree to a price hike.

Before committing to buying a property, carefully assess your location preferences by considering these questions:
Do I enjoy living in the current city?
Can I envisage a long-term future here?
Is the real estate market steady at the moment?

If you’re firmly committed to buying a house, do you have substantial savings for a down payment and potential emergencies? Homeownership involves more costs than just a mortgage. You may have to cope with expensive maintenance or repair work at any moment. Hence, it’s always advisable to reserve some funds for such unexpected situations.

Being a homeowner also means taking on maintenance responsibilities that a landlord would ordinarily handle in a rented property. Familiarizing yourself with basic home repair knowledge can save you a significant amount of trouble and money.

Deciding between renting and buying a home is a significant commitment that isn’t easily reversible or ideal if viewed as a temporary decision. You’re the one best acquainted with your needs, and these should guide whether buying or renting is the right choice for you at present.

From your experiences, how did you make the decision between buying or renting? Do you regret buying a home, or were you tired of renting?

Source: SmartAsset.com

February 3, 2025
Top Back-to-School Offers You Shouldn’t Miss

The back-to-school season is already upon us. This period, which involves shopping for school clothes and supplies, can become overwhelming, particularly for parents with multiple kids. The key to approaching this season stress-free is adequate planning and efficient organization. In order to shop without breaking the bank, scouting for sales and back-to-school deals can give you more value for your money. Below are some of the top back-to-school discounts from several retailers for this year.

TARGET

Target is a favorite many, mainly for its affordable, high-quality products and irresistible low-priced popcorn. Last year, Target gave its shoppers a gift card when they spent a certain amount on school supplies. This year, they are offering a $5 gift card for spending $30 on school supplies. They also have several back-to-school deals like notebooks, mechanical pencils, markers, and Elmer’s glue sticks all for just 99 cents. There’s also a 20% discount on athletic shoes, and you can get TI30 calculators starting from $8.99. Click here to view their full catalogue.

WALMART

Walmart is synonymous with affordability for all kinds of shopping—clothes, food, toys, home accessories, and undoubtedly, school supplies. Walmart’s price-matching policy is a bargain hunter’s dream. This policy allows customers to purchase an item at the same lower price if they find it on offer by another retailer. The catch is that the item has to be identical, and they don’t price match private brands. This guarantees you the best prices for your school supplies. For more information on Walmart’s price-matching policy and the list of retailers they match, click here.

This year, for school supplies, Walmart’s $1 or less club offers items like notebooks, crayons, glue sticks, colored pencils, paper, and binders. There are also graphing calculators for $88 and basic backpacks for only $4.97 each (offer valid through August 13). To stay informed on all their deals, check Walmart’s weekly ad here.

OFFICE DEPOT

This year, Office Depot is making waves with their 1 cent sale. After spending $5, you can get several school supplies like markers and glue for just 1 cent. Other offers include packs of round tip pins and markers for just 25 cents each, and college-ruled paper, pencils, and binders for $1. They also have flash drives starting at $3.99. For electronics, there’s a big Dell sale, with Dell tablets beginning at $319 and a Dell laptop at $259. To discover more, view their full ad here.

WALGREENS

Another top retailer offering excellent discounts is Walgreens. This year, they are offering $8 lunchboxes, backpacks from $4, and 16GB flash drives from $5.99 for rewards members. If you are not a member, you can always sign up and still enjoy deals on markers, crayons, and notebooks, all for $1. There are also BOGOF (Buy One Get One Free) offers for select items. Check their weekly sales ad here for more.

Remember, caution is key. These deals won’t stay forever, and most of them operate on a first-come, first-serve basis. To avoid a last-minute rush and the risk of missing out, it’s advised you get all your shopping done as soon as possible. Also, ensure you read all the terms and conditions properly, as some deals could change within the week.

Happy shopping and have a great back-to-school season!

Which are your favourite places to get the best back-to-school deals? What strategies do you use to get the best prices? Share them in the comments below.

February 3, 2025
Discovering Investment Money on a Tight Budget

Long-term financial stability significantly depends on investing. It’s a strategy that helps you accumulate wealth, diversify your income, prepare for retirement, and potentially leave a significant sum for your loved ones. However, many people delay or ignore investing because they believe it’s outside their financial reach.

I can relate; when I was barely getting by, investing wasn’t even on my radar. Even when I started earning a decent salary, my priority shifted to paying off debts – which isn’t a bad idea. But in investing, it’s beneficial to start early allowing your money the time it needs to multiply through compound interest. That’s why even as I was managing debt, I started to get into investing despite a tight budget.

Feeling like investing isn’t financially possible? Here are some tips on finding money for investments on a shoestring budget.

UNDERSTAND THAT A SMALL INVESTMENT CAN MAKE A BIG DIFFERENCE

A common misunderstanding is that investing requires large sums of money. But that’s far from the truth. I understand that taking the leap by putting money in the market can be intimidating, especially if you fear potential loss.

I started investing with just $100. Sure, there are some risks, but many investors are drawn to options like index funds due to their diversification benefits and lower-than-average fees, meaning greater retention of returns.

Investing in ETFs or Exchange Traded Funds is also a smart choice for beginners, as they give a diversified mix and are easy to buy and sell just like stocks.

For new investors, a platform like Betterment can be quite helpful by allowing you to set investment goals like opening and contributing to an Individual Retirement Account (IRA). They also guide you in how to distribute your funds into ETFs based on your portfolio allocation in stocks, bonds, or a combination of both.

Starting by investing in your retirement is always a good idea. If a 401 (k) plan is provided by your employer, it won’t cost you much to contribute, even modestly at first. You can also open an IRA even if you cannot maximize your annual contributions immediately (which are currently $5,550 for those under 50 and $6,500 for those over 50).

The bottom line is investing doesn’t always involve dealing with vast sums of money. You can begin investing with just $100, starting small with index funds and ETFs.

CUT OUT UNNECESSARY SPENDING

Once you realize that modest amounts can be invested victoriously, you can work on trimming down your budget to free up more funds for investing. This action may involve revising your budget regularly as our expenses and lifestyle can fluctuate.

To build an investment-friendly budget, review your expenses carefully. Identify any costs that can be reduced or eliminated completely.

Making investing a priority over non-essential expenses like dining out, shopping, or cable TV, can increase your investing potential. You don’t necessarily have to exclude these expenses entirely, but even a reduction could free up significant funds. Also, make sure you’re not overpaying for any services – shop around for better deals if needed.

REMEMBER: “You can’t afford NOT to start investing!” – the other way around creates roadblocks.

CONSIDER A HIGHER PAYING JOB

If your budget is already stretched thin, consider seeking a job with a higher salary to increase your capabilities to invest. Although this might not be an overnight change, it’s worth exploring. A pay raise or even a career change to a better-paying field could be beneficial.

If your current income isn’t meeting your financial goals or basic needs, shifting focus on earning more is the key.

With a considerable annual raise or by changing your job for a higher salary, you can maintain your lifestyle while utilizing the extra income for investment. Even a 10% pay bump can make a significant difference.

TAKE UP A SIDE JOB

Yet another strategy to increase your income is to take on a side hustle. Consider your talents, interests, and what kind of work you’d enjoy doing. Possibilities range from a second job to freelancing, babysitting, dog walking, lawn mowing, and online surveys.

For me, freelance writing was the best side hustle, which ultimately turned into a full-time job. In just a few months, I was earning above $1,000 per month. If you manage to find a side hustle that gives you an extra $1,000 monthly, that’s an additional $12,000 per year for investing.

SELL UNUSED ITEMS

Increasing your income doesn’t stop at your job. Selling unused items online can also scoop up extra money. I used eBay to sell jewelry that I no longer needed, and I was pleasantly surprised by my financial gains.

Selling items such as clothes, shoes, bags, books, toys, films online, or to resale shops can also bring in cash.

Take a look around your home. You’ll probably find items you haven’t used in a while that could bring in some money. Not only does selling unused items make extra money for investing, but it also helps declutter your space.

CONCLUSION

There are plenty of reasons to start investing today. Two significant ones are keeping up with inflation and growing your money exponentially.

If finding money to invest while maintaining a comfortable lifestyle is a challenge, consider a combination of the strategies listed above.

Remember, “You can’t afford NOT to start investing!”

Have you started investing? If no, what’s the hindrance? Do have a plan to tackle it?

February 3, 2025
How to Transition from Freelancing to a Full-Time Position

We’re living in the era of freelance work, with many people switching jobs frequently to seek better opportunities or completely exiting the conventional workforce, and leaving their 9-5 jobs behind. This is an ideal time to monetize your talents and work on your own terms. I often advise people who are eager to earn an additional income to consider freelancing because of its flexibility and the potential to determine your own rates.

While juggling college and parenting, I was too occupied and drained to secure a second job as a means to augment my income and clear my debts. I began working as a freelance writer and witnessed my income rise quickly. After around a year and a half, I decided to quit my primary job and commit full time to freelancing. Freelancing is not suitable for everyone, but it works wonderfully for me. If you aspire to tread a similar path, here are some tips to transition a freelance gig into a full-time profession.

SELECT A PROFITABLE, LONG-LASTING STREAM
The secret to successful full-time freelancing is securing regular work from clients as opposed to sporadic projects. Offering a service that’s in demand, profitable, and can guarantee sustained work can help you achieve this. I opted for writing because I’m aware that millions require top-notch content for their blogs, publications, or websites.

The demand for gifted writers is forever, and it’s not a job that can be eliminated entirely by technology. After 18 months of working with a host of clients, I noted a pattern and felt my income was stable enough to sustain myself.

If writing is not your forte, there are numerous other services you can offer. Graphic design, programming, transcription, editing, photography, digital marketing, and virtual assistant work are all lucrative niches to build a sustainable career over time.

INITIALLY AIM FOR 1-3 CLIENTS
If you get one-time gigs, express your interest in ongoing work and negotiate a contract.

ESTABLISH YOUR REPUTATION
Successful full-time freelancers rely on robust client relationships and an extensive network for future leads or resources. Establishing a strong presence helps in ensuring ample leads and client relations, hence securing enough work.

Develop a professional website, portfolio, and establish your presence on social media. Attend networking events to coalition with more people. Participate in Facebook groups or Local Meetup events to network.

Building up a commendable reputation for your services is crucial as your next client could find you simply because they were impressed by your work.

HONE YOUR PITCHING SKILLS
Even if you base your freelance business on referrals, it’s still imperative to learn how to pitch efficiently to clients when you are running low on leads. Don’t shy away from pitching to clients directly but ensure they’re well thought out.

Understand how to communicate effectively via email and work towards delivering a succinct and actionable pitch. I have bagged several gigs through cold pitching.

SET YOUR PRICES FOR PROFIT
Being a freelancer means running your business, which involves marketing, managing emails, sending invoices, and accounting. You also have to cater to your taxes and costs such as health care and retirement plans, which means you need to charge enough to meet all your financial demands.

Save for the unexpected
Uncertainties will crop up despite dedicated efforts. For instance, you might lose a client abruptly. It’s crucial to have sufficient savings to cover expenses as you build your client base. I suggest freelancers save six months’ worth of expenses before going full time.

I’m thankful for the gig economy and the freelancing opportunities it presents. With the right choice of service, right pricing, networking, increasing your client load, and substantial savings, it’s possible to transition a freelance gig into a full-time job. Are you considering freelancing full time? What actions are you taking to achieve this?
Source: SmartAsset.com

February 3, 2025
4 Strategies to Begin Investing Even Without Prior Knowledge

To many, the term “investing” instantly evokes images of Wall Street men in suits, closely monitoring the flux of millions on a stock exchange ticker. However, with a wide array of options today, beginning your journey into investing has become simpler and more accessible than ever. It’s perfectly okay to feel apprehensive and have a ton of queries when starting. Just like any other first-time experiences such as driving, bicycle riding, going on a date, or taking up extreme activities like skydiving or rolleramp riding, investing too could feel like a big leap.

The combination of a learning curve and the fear of risking one’s hard-earned money can certainly make investing seem intimidating. But remember, this path is actually one of the surefire routes to financial security. No successful investor started knowing everything; we all learn as we venture forth.

SO, WHAT IS INVESTING?
Investing is the act of acquiring assets that appreciate over time and deliver returns either as income or capital gains. Broadly, investing can also be regarded as dedicating time or resources to enhance one’s own life or contribute positively to others. Financially speaking, investing involves buying securities, real estate, and other valuable assets with the intent to secure income or capital gains.

WHERE DO I BEGIN INVESTING?
The best approach to start investing depends on your financial objectives and affordability. However, here are four key points to consider.

1. UNDERSTARKING YOUR FINANCES
Before plunging into investing, it’s vital to have a clear understanding of your financial state. It’s a prerequisite to have some savings tucked away before you even consider starting an investment account. But how much is enough? Generally, it’s advisable to clear debt, establish an emergency fund, and start contributing to your retirement pot prior to investing elsewhere. Most successful investors recommend having around three to six months’ worth of living expenses saved up before considering long-term investments.

2. DOING YOUR HOMEWORK
Make sure you understand the product before you part with your money. It’s common for people to buy into a sales pitch without considering the product itself. Fathom the different types of investment opportunities such as bonds, shares, mutual funds, and property. You can start by speaking to investment consultants, engaging a financial advisor, or even discussing with family members. Reading finance-related books and publications is also a great idea.

3. WHERE TO INVEST
Once your income and savings improve, consider diversifying by investing small amounts across various products. That way, if an investment doesn’t work out, you have others to fall back on. If your funds are limited, it’s a good idea to start with an investment plan such as a company pension.

4. CHOOSING THE RIGHT INVESTMENT ACCOUNT
Investing can be relatively easy and doesn’t require a large sum to start with. Deciding the best type of investment account for you depends on your preferences and circumstances. A robo-advisor could be ideal if you want to invest but don’t have the time or desire to manage your own investments. If you’re a hands-on kind of person, an online brokerage account might suit you better. And if you’d prefer professional assistance, engaging a financial advisor could be the best route.

IN CLOSING
For those preparing to embark on their investment journey, remember to be patient. Investing demands time and there will be highs and lows. The key is to stay the course, manage your expectations, do your due diligence, and most importantly, enjoy the journey.

February 3, 2025
Four Strategies for Lowering State Income Taxes

I chanced upon an article recently that ranked my state among the ten worst states concerning taxes. It didn’t surprise me – I knew it was factual based on my experience. For the first time in our ten years of marriage, we owed state income tax in the last two years. It’s truly disheartening to owe thousands in taxes! The article sparked my interest in researching ways to lower state income taxes. Here are four strategies I discovered to mitigate our colossal tax bill this year.

MOVE IT
Our first option to alleviate the tax burden involves relocation. Though moving isn’t precisely a walk in the park, it could significantly shrink our tax bill. We previously resided in Tennessee and Texas, states devoid of income tax. Nevertheless, our current state charges high income tax, so moving to any of the lower-rate states would be advantageous. A valuable resource to check your state’s ranking in income tax rates can be found here. Furthermore, it’s advisable to examine cost of living comparisons; lower taxes don’t necessarily equate to lower living costs in a state.

SLASH YOUR PAY
It sounds illogical, yet decreasing my wages would lower my tax bill. Funds funneled into a 401(k) are pretax, which reduces my taxable income. It creates a win-win scenario – bolstering my retirement savings while reducing my tax output. However, this isn’t the best fit for us, as we can’t sacrifice much for our 401(k) due to steep student loan payments.

GRAB WHAT YOU’RE ENTITLED TO
By conducting personal research or hiring a competent tax professional, you can find additional deductions or tax credits to lessen your tax load. Make a wise decision – I’ve known individuals who purchase a new vehicle to receive a tax credit, though they don’t necessarily require one. The equation here doesn’t add up; it’s only rational to buy something if needed. Otherwise, you end up purchasing costly appliances or vehicles for a meager tax deduction.

EXPLORE ALTERNATIVES
If all else fails to reduce your state income taxes, contemplate withholding extra money from your salary. While it’s not ideal to owe a substantial money when tax season rolls in, it’s equally unfavourable to receive a hefty refund. A large refund means you haven’t utilised your money optimally such as through investments.
In our case, after researching the state tax laws, I found relatively few deductions available. Our only option is to request greater withholding from our salary. We’re barely over three months away from ending the year, so if you’re seeking to lower your state income taxes, act now!

February 3, 2025
Assistance for the Unemployed Might be Nearer Than You Assume

Experiencing job loss is something no one ever anticipates and even if you’ve been prudent by saving for emergencies, it can be rather distressing to see those savings dwindling over months of unemployment. What happens if you exhaust your funds before securing a job?

Certainly, aside from your emergency savings, you likely qualify for unemployment benefits, which could extend your financial longevity. However, with almost 40% of jobless individuals remaining unemployed for more than 27 weeks (as per Bureau of Labor Statistics), you might need to consider more aggressive strategies to meet basic needs like utility bills, groceries, and mortgage payments.

Thankfully, numerous alternative solutions are available:

1. UTILIZE YOUR FACEBOOK NETWORK: Today, raising funds through social media platforms like Facebook is common for individuals facing financial difficulties. By sharing your story, pictures, and reasons for needing support, you could encourage donations from others.

2. TURN TO CROWDSOURCING PLATFORMS: Sites like Go Fund Me have helped many in difficult situations. For instance, Bill Mann who was at the verge of foreclosure was able to raise over $8,000 from 119 donors within a few weeks thereby averting his home’s foreclosure.

3. SEEK HELP FROM YOUR CHURCH: Many parishes have funds earmarked for assisting members in dire straits. Your local church could provide you with some meals as well as cash to help tide over rough patches.

4. VISIT NEARBY FOOD PANTRIES: Your city likely has food pantries where you can acquire provisions to last a few weeks. Making use of these before your emergency fund is completely depleted can help stretch your savings.

5. APPLY FOR SNAP: The Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program, can provide you with funds to purchase groceries. If you’ve been out of work for several months, you’re likely to meet the stringent qualifying criteria.

6. CONSIDER BORROWING FROM RELATIVES: Borrowing from family members can be a fallback option when faced with severe financial stress. Drawing up a repayment agreement can ensure clarity on the repayment terms.

The dread of being unemployed with no regular income is indeed formidable, especially when it spans several months or even a year. Battling despondency during this period can be challenging, but adopting some or all of these strategies can help bolster your state of mind and financial stability even amid extended periods of joblessness.

February 3, 2025
eBay is Now Offering Paid Maternity Leave

eBay has recently enhanced its maternity leave policy, now allowing new mothers a six-month paid leave. The announcement made on Friday stipulates that following childbirth, the new mothers will be entitled to 24 weeks of fully paid leave, a significant improvement from the previous 10 weeks at 80% pay. Furthermore, for the first time, new fathers are not left behind. They are entitled to 12 weeks of fully paid leave. eBay also introduced a Family Care Leave policy, granting employees 12 weeks of paid leave to look after a seriously ill family member. Despite there being no legal requirement for paid parental leave in the U.S., eBay joins the 12% of private sector companies that provide this benefit, as per the Labor Department. More details can be found on CNN Money.
Image credit goes to PublicDomainPictures.

February 3, 2025
Is Employer’s Liability Insurance Necessary for Small Businesses?

If you employ anyone, irrespective of their contract status – casual or permanent, full-time or part-time, volunteer or paid – the law requires you to have Employers’ Liability Insurance. This policy must cover at least £5 million. If you fail to meet these conditions, you can face legal action from the Health and Safety Executive and significant daily fines. In worse scenarios, you may face up to 14 years of imprisonment.

Employers Liability Insurance is primarily designed to secure your employees. In case they sustain injuries or die at their workplace due to any negligence on part of the business, they (or their family members) can seek damages or compensation for their anguish and related losses. If they win their litigation, the compensation amount can be claimed from your business or personal assets, if you’re not a limited company. Few small businesses, however, have assets substantial enough to cover these costs.

The purpose of Employers’ Liability Insurance is not just to cover the compensation but also any associated legal expenses, which can amount to several thousands of pounds.

Small businesses often engage close family members to undertake important tasks. The benefit is that immediate family members are typically not considered ‘employees’, exempting you from the need of Employers’ Liability Insurance (though it can still be beneficial to have, particularly if their contribution impacts the operation of your business). Note that if your business is a limited company, you need to have Employers’ Liability Insurance even if a close relative is in your employment.

Ignoring your obligation to have Employers’ Liability Insurance could lead to repercussions, even if your employee does not sue for damages or their claim is unsuccessful. Authorities, like the Health and Safety Executive or the Police, can still bring criminal charges against you.

To identify whether someone qualifies as your ’employee’, consider the following factors:

– Do you remunerate them?
– Do you handle their tax and national insurance?
– Do you provide the equipment necessary for their work?
– Do you direct their work specifics – how, when, and where?

An affirmative answer to any of these questions means that you have an employee. If uncertain, consult a lawyer. It will cost much less than unwanted Employers’ Liability Insurance premiums or paying compensation and/or a fine for not having it when legally obligated.

February 3, 2025