Employee Benefits Liability Insurance: What You Need To Know

Getting an employee benefits liability insurance policy would ensure all your employees’ grievances and claims are handled in a structured, professional way. It would also ensure that any inadvertent error by your HR or Legal teams does not end up as a cost to the company.

It is hiring time at your company and a flock of young hopefuls are being onboarded by your HR team. Your recruiting managers are getting the usual paperwork done for the new employees’ benefits, but a certain team member happens to omit some basic data by mistake. You may not think much of it and ignore it.

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Despite stringent processes and cutting edge technology, people may err. To err may be human, but to ignore the error may prove costly in some cases. In the above example, data errors or errors in administrating benefits to employees may come back to haunt you in the form of liability later on.

This is exactly where employment benefits liability coverage comes in. A general liability insurance coverage is always in the best interest of all your employees, especially for your company.

What is Employment Benefits Liability Insurance?

Employee benefits liability coverage is a type of general liability insurance coverage that safeguards various organisations in case of an administrative error, or when omissions occur.

It basically activates employee benefits.

Even though EBL insurance is provided as a completely standalone policy, employers have the option to add it to another policy, such as disability insurance.

A few examples of such advantages in employee benefits liability coverage are:

  • Life, accident, dental, vision, mental, and other health benefits
  • Stock ownership, pension, profit-sharing
  • Tuition assistance, maternity leave, retirement plans, tuition assistance, etc.
  • Unemployment benefits, social security, disability, workers’ compensation

Validity Of Claims Made Under Employment Benefits Liability Coverage

Similar to the other various insurance policies, employee benefits liability coverage is provided on a claims-made basis.

This basically means that the provider would cover a claim only if the entire claim is made while the policy still happens to be in effect ie. during the policy period. It does not suffice if the event that caused the claim occurred during the policy period.

In cases where a claim is made retroactively, the policy would need to be retroactively dated and even paid.

It’s quite obvious how this situation is a major win-win for both. The employer still has the chance to sort out the mistake and compensate for the insurance immediately after the oversight is recognised, and the provider ends up getting the company as a client too.

Types Of Benefits Covered By Employment Benefits Liability Insurance

Even though employment benefits liability insurance does sound a tad like Fiduciary Liability insurance, they are not exactly the same, even though they do share some similarities.

When it comes to the Employment Benefits Liability coverage, it’s specially designed to safeguard employers from mistakes, omissions, miscommunications, or negligence in the administration of various benefit plans.

Fiduciary liability coverage is wider than that of a simple EBL policy. It covers all the administrative errors, omissions, and negligent acts that happen to be performed in breach of fiduciary duty.

This type of liability can arise due to misleading advice, denial of benefits, or conflict of interest by the fiduciary. A fiduciary could be anyone entrusted with the management of the employees’ benefits.
There are a few other providers that cover benefits like therapy or even coaching. You would have to work with your insurance provider so that you can find an employee benefits liability coverage plan perfectly suited for all your business needs.

Getting an employee benefits liability insurance policy would ensure all your employees’ grievances and claims are handled in a structured, professional way. It would also ensure that any inadvertent error by your HR or Legal teams does not end up as a cost to the company.

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