Understanding Employee Benefits and Liability Coverage

What is Employee Benefits Liability Insurance?

Employee Benefits Liability (EBL)—also referred to as Employee Benefits Liability Insurance, Employee Liability Insurance—protects the business holding the liability policy against an error or omission that was made regarding the administration of employee benefit plans. Most claims revolve around clerical errors such as:

• Where the employee is not added to their benefit plans
• The employee is added to the wrong benefits, OR
• The employee is accidentally deleted from coverage altogether

It can also include coverage for incorrect or inaccurate advice given to an employee about their particular benefits. Mistakes in calculating the amounts of contributions of the employer or employee are also covered by employee benefits liability coverage. Such errors are usually made by the Human Resources Department, though they can also come from record-keepers, accountants, and trustees.

Employee Benefits Liability is a Claims-Made Policy

What does claims-made mean? A claim is covered by the insurance policy if it is made while the coverage is active. If you want a claim covered for a retroactive date, you have to pay for the policy to be retroactive or add a tail to the end of it.

Is Employee Benefits Liability Coverage Included in a General Liability Policy? 

Employee benefit liability coverage can be a standalone policy or added as an endorsement on another policy such as commercial general liability insurance. It is often confused with fiduciary liability insurance. Fiduciary liability is insurance coverage that protects a business from administrative errors and omissions their fiduciary duties are breached and it results in a financial loss. 

Why Type of Insurance Policies Does Employee Benefits Liability Cover?

Employee benefits liability covers most company sponsored policies such as:

• Health Insurance
• Dental Insurance plans
• Vision coverage plans
• Life Insurance plans
• Workers’ Compensation
• 401k/retirement plans
• profit sharing plans
• Social Security
• Unemployment
• Disability insurance
• Pensions

Limits of an Employee Benefits Liability Policy

These liability policies usually have two different types of limits:

1. Each Employee Limit: This amount is the most an insurer will pay per each employee and/or their spouses and family.
2. Aggregate Limit: This is the highest amount the insurer will pay out per policy for an individual business.

NOTE: A business will have to pay a deductible per each occurrence.

Exclusions from Employee Benefits Liability

Claims that are not covered by this insurance policy include:

• Claims of poor performance of an employees 401k
• If an employee is not happy with their salary or wage
• Bodily injury and property damage claims
• Any benefit provided by the company that is not of monetary value is excluded
• Fraudulent or criminal acts by the administration
• Breaches covered under the Employee Retirement Income Security Act (ERISA)

If a company has less than 50 employees, any health insurance benefit program that is offered is completely voluntary. If claims are made against a company with less than 50 employees regarding an issue including health insurance, there may only be partial coverage of the claim for the employee.

Why Do You Need EBL Coverage? 

Liability insurance for employees is among the least expensive kinds of coverage, particularly if it is an endorsement. It should, however, be part of your portfolio risk management strategy, and it’s also a way to ensure that valued employees aren’t left in the lurch if errors occur. Here are some exampled of why employee benefits liability insurance is necessary:

Example #1: A new employee chooses her benefits in the group medical plan, but the paperwork gets lost at some point after she has finished it. No one notices that it became lost, until the new employee ends up critically ill. When she’s admitted to the hospital, she finds out her health insurance isn’t active. Because of the errors or omissions of your business, you are liable to enroll her in a benefit plan and pay for her medical costs.

Example #2: An employee is injured on the job and unable to work for two months. Workers' compensation insurance should cover some of their medical expenses and lost wages. However, the employee believes they weren't given the correct amount of money allowed under this employee benefit program. Employee benefits liability insurance can step in to cover costs if the employee sues for the money owed them.

How Much Does Employee Benefits Liability Insurance Cost?

The cost for an EBL insurance plan depends on whether or not benefits are offered, the size of the company, and how many employees you have. The cost can be as low as $30 per month, but it's best to speak with a knowledgeable agent to help determine if an EBL insurance plan is right for your business. An agent can also help you determine other types of insurance your small business may need.

Free Employee Benefits Liability Insurance Quote

If you provide benefits to your employees, plans like this may be a good investment to protect your small business. If you have any further questions or would like a free quote, complete the form at the top of the page and one of our specialists will connect with you shortly. Or give us a call at 1-877-907-5267.

Related Articles: General Liability Insurance, Errors or Omissions Insurance, Employment Practices Liability Insurance