Why is Employee Benefits Liability Important?

As a business owner, you’re certainly well aware that your employees have the power to make or ruin your company. The primary goal of your personnel is to ensure that everything in your company functions smoothly. So it’s only natural that you’d take care of them in turn. Many firms provide their employees with a variety of group benefits packages, which might include a variety of health and financial security options. Benefits packages not only benefit your employees, but they also help to protect your firm as an investment, increase productivity, and provide tax-efficient remuneration. Benefits programs might even help your company compete by attracting and retaining great staff.


If you have a benefits program, however, you may be liable for employee benefits. That’s not to say you shouldn’t offer these products; rather, you should do your research and safeguard your company.


EMPLOYEE BENEFITS LIABILITY INSURANCE: WHAT IS IT?


Employee benefits liability insurance is similar to errors and omissions insurance in that it covers damages resulting from mistakes or misinformation about a company’s benefits package. These losses can be not only costly but also time-consuming, necessitating a significant portion of your company’s resources to be spent on resolving the problem before it gets out of hand.


Employee benefits liability insurance can be allocated to cover a variety of employee benefit schemes, such as profit-sharing plans, health, dental, and life insurance, employee stock options, and even workers’ compensation. You may have an employee benefits liability exposure if you offer any of these programs to your employees and do not have coverage since you, as the business owner or program administrator, are accountable for any inadvertent errors or omissions.


Employee Benefits: Liability Insurance Coverage WHAT DOES EMPLOYEE BENEFITS LIABILITY INSURANCE COVER?


It is intended to protect small and large businesses against potential financial losses if a company’s sponsored health plan is neglected. Consider the following instances in which employee benefits liability insurance may be required:


When HR doesn’t sign up a new worker for the company’s health plan, the worker gets sick or hurt without warning.


As the person in charge of the plan, you don’t explain what the actual benefits are, so a member of your staff gets them wrong.


HR makes a mistake that prevents a new employee from enrolling in a plan, even though they filled out all of the required information.


Contractors for your company feel they are entitled to be considered full-time employees and hence qualify for your company’s programs, so they bring a lawsuit against you.


Although it may appear to be a specialized topic, not having this form of insurance while your company offers a single benefits program or multiple plans leaves your company vulnerable. Your company must obtain “EBL” (or employee benefits liability insurance). The company’s current commercial general liability policy won’t cover losses caused by an administrative mistake.


WHAT DOES EMPLOYEE BENEFITS LIABILITY INSURANCE NOT COVER?


Employee benefits liability insurance, like any other insurance policy, may have specific exclusions. EBL will not cover any claims arising from poor financial advice or performance predictions, nor will it cover any liability you may have as the person in charge of your benefits plan under the “ERISA”, or Employee Retirement Income Security Act.


Fiduciary liability insurance, which is sometimes confused with employee benefits liability, may be worth considering to protect your company from any risks. Fiduciary liability insurance protects firms from ERISA exposures for special plans caused by negligence, misrepresentation, or error. Fiduciary liability insurance is more complete than EBL because it may also cover administrative mistakes and claims of negligence, in addition to your company’s responsibility for any administrative duty violations.


WHAT DOES LIABILITY INSURANCE FOR EMPLOYEE BENEFITS COST?


The cost of this coverage is influenced by a few factors. The number of employees is the most important factor in determining the cost of EBL coverage. The business’s industry is the second thing to consider. Here are some of our firsthand accounts.


Example 1: This coverage costs $266 per year for a plastics firm with 164 employees.


Example 2: A medical office with 188 employees has EBL coverage included in a $350-per-year general liability plus endorsement (GL Plus).


Example 3: This coverage costs $171 per year for a commercial general contractor with 35 employees.


DO I NEED LIABILITY INSURANCE FOR EMPLOYEE BENEFITS?


First, ask yourself…


Do I provide perks to my employees? If you answered yes, then the answer to the previous question is that having this type of coverage is a tremendous advantage. Insurance should never be used as a substitute for sound business practices risk management, and a thorough hiring and screening procedure. However, having one as a backup is a smart idea because we never know when problems will happen. Even though we have done nothing wrong, we may be served with a lawsuit and must defend ourselves in a court of law – which can be costly! It’s always better to be safe than sorry.

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