employee benefits

Employee Benefits Liability Insurance

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What is Employee Benefits Liability Insurance?

You've set up a small business and now have a small team under your wing. Offering them various benefits beyond a salary will help you retain them. However, clerical errors and miscommunication may prevent that from happening.

If your employees make a claim against you for not receiving their expected benefits, Employee Benefits Liability Insurance will cover your defense and legal costs.

What Employee Benefits Liability Insurance is all About:

Infographic - Employee Benefits Liability@2x

What Does Employee Benefits Liability Insurance Cover?

Frequently Asked Questions

What Is Employee Benefits Liability?

This type of insurance is designed to help insure against lawsuits related to the management of employee benefits.

Most insurance plans of this type will specify that the insurance policy covers any grievances filed by employees that are directly related to the management of an employee benefits plan.

When defining “management”, these policies refer to each of the following:

  • Benefits counseling services
  • The interpretation of benefits
  • The handling of employee records
  • The cancellation, termination or enrollment of employee benefit plans

This policy is strictly defined to specify only employee benefits. It is often confused with other kinds of policies, including Fiduciary Responsibility Insurance.

Unlike other insurance policies, Employee Benefits Liability Insurance only insures a business and its benefits employees in cases of negligence, error or omission in the management of a benefits plan. It does not insure for the expected return of an investment vehicle.

This policy is a claims-made policy. This means that it covers claims made during the coverage period. This is not to be confused with occurrence policies, which can cover claims that are made outside of the period of coverage.

Many Employee Benefits Liability Insurance policies also have a retroactive date applied.

This type of insurance policy will cover all areas of employee benefits including health insurance, retirement plans, pensions, worker’s compensation, certain tax withholdings and any paid holidays or leave that your company may offer.

Some benefits are required by law. Others are not. Regardless, this insurance policy covers claims made in the management of any benefits that a business has contractually agreed to give and manage.

Who Is Covered by Employee Benefits Liability Insurance?

Your Business - If your business commits and error or omission when it comes to your employee benefits, protection is found here. Think forgetting to sign an employee up for their company benefits, or even forgetting to offer it all together.

Do I Need Employee Benefits Liability Insurance?

This insurance may come in handy if:

  • Your business offers any benefits to employees
  • You have employees who manage the benefits programs you offer
  • You offer different benefits to different types of employees
  • Your business has a high employee turnover rate

What Are the Limits of Employee Benefits Liability Insurance?

This insurance policy is strictly limited to covering both legally required and optional employee benefits. Health insurance, for example, is often not legally required.

Many businesses offer subsidized health insurance plans as a benefit of employment in order to attract and retain higher quality employees.

A common misconception is that employers must offer benefits to full-time employees or after they have reached a certain size. However, the Affordable Care Act only specifies the employers with over 50 full-time employees provide health insurance, or pay a penalty.

Health insurance is still one of the most common benefits businesses offer that results in claims against an employer.

Health insurance, among all other benefits, is a common target for benefits claims. While this insurance policy will cover some of the costs incurred in the situation of a mismanaged benefit, it may not cover all of the costs.

Liability limitations may apply on a per-employee basis as well as a liability limitation amount for all employees as a whole. A deductible of at least $1,000 is common.

Employee Benefits Liability Insurance also has a retroactive date applied. This date may be the exact date that this endorsement is added. It may also be a date after the policy is enacted.

However, any claims made before the retroactive date will not be honored by the insurer. As a claims-made policy, this type of insurance will not cover any claims made after the policy has ended.

Furthermore, this policy is strictly limited to monetary-based benefits, and will not cover many uncommon types of benefits.

This includes the quality-of-life benefits increasingly offered by many technology start-ups, such as free coffee and food, on-site yoga or on-site massages.

What is an employee benefit plan?

An easy way to know what an employee benefit plan is is to consider it a benefit to your employees that is anything other than their salary. This includes health insurance, dental. Vision, paid time off, retirement plans, etc.

What is typically excluded from an Employers Liability Insurance?

What is typically excluded from an employer’s liability insurance? Employers’ Liability usually excludes anything relating to Employment Practices which includes hiring, firing, benefit plan issues, harassment, and discrimination just to name a few.

Is Employers Liability Insurance the same as Workers Compensation?

No, Workers Compensation provides lost wages and medical expenses for employees if they become hurt or ill while performing their duties for your business.

Employer’s Liability will cover your business for lawsuits where your employees claim that they became hurt or ill because you were negligent as an employer, which caused the incident.

How Much Does Employee Benefits Liability Insurance Cost?

Costs for these policies vary. How many employees that are covered by the policy will affect its total cost.

At least a $1,000 deductible can be expected for all claims that are made. This type of insurance is known to be one of the most affordable types of insurance policies that a business can purchase.

Are You Ready to Get Covered?

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