Generally an employer will not let you work whilst you are signed off, as you said this could impact on their employers liability insurance.
An employer cannot sack you simply for being off sick. However, if the period were to continue for a long period, the your employment contract could become "frustrated". They could then terminate your employment contract. However, they should not do this without consulting you and an independant medical advisor. You contract/terms of conditions should detail the procedure to be followed.