What is Employment Benefits Insurance?

Buying employment benefits liability insurance will give you coverage should any errors be made on the administration of the company benefits you offer to your employees. It’s no secret that having a good company benefits offering can help you to attract and retain talent in your organization. However, should a mistake be made that negatively impacts an employee, this could leave you exposed to a lawsuit.

If you want to protect your business against a potential lawsuit, buying employee benefits liability insurance can help.  

What is Employee Benefits Liability Coverage?

Employee benefits liability coverage is typically offered as an endorsement to a business general liability policy. It is sometimes referred to as EBL coverage and may also form part of a fiduciary liability policy as well. It covers any liabilities of an employer for any omissions or errors in their administration of an employee benefits scheme. A prime example of this would be a failure of the company to advise any employee of their benefit programs correctly.

Do you need to buy Employee benefits liability insurance?

There are a number of factors to consider if you are trying to work out if you need to buy EBL coverage for your company. Things such as the type of benefits you offer and your company headcount are essential to review. If you are a company that only has a limited number of employees and you deliver very few benefits, then buying employee benefits liability insurance might not be necessary.

If you are uncertain, or you’d like to get professional advice, having a chat with an expert commercial insurance agent can help you decide whether or not you should buy EBL coverage.

What are the benefits of an employment benefits liability insurance policy?

An employee benefits liability policy carries a number of advantages to business owners. It can cover any damages that your business will be liable to pay out due to an act, error or omission in the administration of an employee benefits program.

What type of errors are covered with an EBL policy?

The specific acts that are covered will vary between insurance companies. They will typically include any errors, acts or omissions in the specific activities outlined below.

• The maintenance of any records or files that relate to employee benefits.
• Informing or describing the details of the benefit plans or the rules of eligibility to any employees, beneficiaries, or any eligible family members.
• The enrolment, termination, or upkeep of members, beneficiaries or eligible family members.

What type of benefits can be covered as part of an employment benefits liability policy?

Before you decide to buy an employment benefits liability policy, you need to check the policy-specifics to make sure the benefits your company offers are covered. The majority of endorsements will use the term ‘employee benefit program’, and this typically covers the following benefits

• Workers compensation
• Medical, dental, life, accident, and other types of insurance plans
• Disability, social security, and other related unemployment benefits
• Profit-sharing, savings, stock ownership, pensions, and other related plans
• Maternity leave, tuition assistance, vacation plans, and other similar plans

What is excluded from an employment benefits insurance policy?

EBL coverage will typically exclude any liability your business has as a fiduciary under the ERISA – Employee Retirement Income Security Act. An employment benefits liability policy will not extend its coverage for any claims that arise because of substandard financial advice.

Other notable exclusions from an employment benefits insurance policy may include breach of contract, fraud, property damage or personal injury, insufficient funds to pay for employee benefits, and employment-related practices.

What is the difference between fiduciary liability and employee benefits liability?

If you are trying to work out the difference between employment benefits liability coverage and fiduciary liability, there is a clear distinction between the two. A fiduciary liability insurance policy covers your personal liability for any breach of a fiduciary duty that is connected with employee benefit program, along with any administration omissions and errors.

The Cost of an Employment Benefits Insurance Policy

The cost of this insurance could be impacted by the type of benefits you offer and the number of people you employ. As we’ve already discussed, an employment benefits liability insurance policy is providing as an optional endorsement to a commercial general liability policy. By speaking with a commercial insurance agent, you can get a quote for this coverage, and establish the exact benefits that will or will not be covered.