In today’s tight job market, more and more small businesses are forced to offer employee benefits to stay competitive with larger companies. And it’s easy for small business owners to make mistakes when administering them. They don’t have extensive human resource departments to handle HR tasks. Mistakes can be costly if they involve employee medical care, retirement funds, or life insurance protection.
The good news: Employee benefits liability (EBL) insurance can protect your small business if you’re ever sued over employee benefit administration errors. This article reveals the top providers of EBL insurance and explains what you need to know to get the right coverage for your business.
- 4 best employee benefits liability insurance providers
- What is employee benefits liability insurance (EBLI)?
- What does EBL insurance cover?
- Benefits covered by EBL insurance
- Employee benefits liability insurance limits
- How is EBL different from fiduciary liability coverage?
- EBL versus employment practices liability (EPL) insurance
- EBL and general liability insurance: How they relate to each other?
- How much does EBL insurance cost?
4 best employee benefits liability insurance providers
Finding the best providers of employee benefits liability insurance can be challenging. After intensive research, here are the 4 best providers that we recommend:
- Simply Business: Best for finding cheap coverage
- CoverWallet: Best insurance-buying experience through an online broker
- The Hartford: Best for purchasing EBLI insurance through an agent
- Nationwide: Best for EBL coverage for larger businesses
Simply Business: Best for finding cheap coverage
Simply Business doesn’t sell insurance direct. Instead, it’s a broker that helps small business owners get EBL and other insurance coverage quotes from several reputable insurance companies.
Pros:
- Simply Business makes it easy to get multiple quotes from different insurers.
- It has a large online library to help you learn about small business insurance and how to prevent risks.
- Simply Business regularly reviews the insurers on its platform to ensure they offer good service and are financially stable.
Cons:
- Simply Business is owned by Travelers, a major insurer based in the United States. However, Simply Business itself is based in the United Kingdom.
- You can’t file a claim through Simply Business. You must do it through your insurer.
- Third-party insurers also handle policy underwriting, customer service, and billing.
CoverWallet: Best insurance-buying experience through an online broker
Similar to Simply Business, CoverWallet is an online insurance marketplace. It makes it easy for small business owners to get premium quotes from several different insurers.
Pros:
- If you want affordable EBL and other insurance protection, CoverWallet can save you the time of contacting multiple insurers to get quotes so you can compare costs.
- You can use CoverWallet’s online tools to pay premiums, file claims, and download proof of insurance.
- Coverage through CoverWallet comes from top-tier insurers.
Cons:
- CoverWallet doesn’t always provide an online quote. Sometimes, you may have to call a representative — or permit them to contact you — to get a quote.
- You will not be able to make claims through CoverWallet. Instead, you must contact the insurer that provides your coverage.
The Hartford: Best for purchasing EBLI insurance through an agent
Pros:
- You can purchase EBLI and other small business insurance from an agent affiliated with The Hartford.
- You can get advice and support during the buying process and beyond from your agent.
- The Hartford is a solid, financially stable, and highly ethical insurer that’s been in business for more than 200 years.
Cons:
- The Hartford offers limited online insurance buying and servicing capabilities.
- Insurance from The Hartford tends to be more expensive than many other companies, especially online ones.
- Some of the company’s back-end systems aren’t as modern and up-to-date as those of newer insurers.
Nationwide: Best for EBL coverage for larger businesses
Nationwide serves all types of companies. However, it delivers a somewhat better customer experience for larger ones, with bigger human resource and benefits operations.
Pros:
- Nationwide provides insurance coverage to over half a million small businesses across the United States.
- It has been in business for 90 years.
- The insurer is a Fortune 100 company with an A+ rating from A.M. Best, an A1 from Moody’s, and an A+ from Standard & Poor’s.
Cons:
- You may not be able to complete your quote online. Instead, you could be required to work through a Nationwide representative over the phone.
- Nationwide’s EBL coverage isn’t always the least expensive.
- Smaller businesses may not have as good an experience with Nationwide as larger ones.
What is employee benefits liability insurance (EBLI)?
Employee benefits liability (EBL) insurance covers employers against errors and omissions that happen when administering employee benefit plans. Benefits include life insurance, health coverage, retirement plans, disability insurance, and more.
Imagine: A new employee joins your company, and your human resource specialist forgets to enroll them in your company’s health insurance plan. A few weeks later, the new worker is involved in a car accident and is injured. When they go to the hospital for treatment, they find out they don’t have the health insurance coverage you promised as part of their employment agreement with you. In this situation, EBL coverage could reduce your business’s financial exposure from failing to enroll the employee in the medical benefits plan.
This is just one example of how EBL could help protect your company. In addition, it could protect your business from defined Affordable Care Act (ACA) and worker’s compensation claims. For example, imagine you have a freelancer working at your firm. They’re injured while on the job. They file a lawsuit against your business, claiming they were wrongfully classified as an independent contractor, arguing that your business should have registered them as a full-time employee. Under the ACA, this would make them eligible for health insurance and other employee benefit plan programs. Your workers’ comp policy should cover their injury and resulting expenses. EBL coverage would cover lawsuit-related costs, assuming the misclassification was a mistake.
What does employee benefits liability insurance cover?
Here are some examples of scenarios that could be covered by employment benefits liability insurance:
- Mistakes made describing employee benefit plans or eligibility rules.
- Missing employee benefits records or files.
- Failing to terminate, enroll, or manage employee beneficiaries.
The more comprehensive the EBL policy you purchase, the better protected your company will be in the event of a claim. Work with a reputable small business insurance agent or company representative to ensure you get the right EBL coverage for your business.
Benefits covered by employee benefits liability insurance
Here are some of the common benefits covered by employee benefits liability insurance.
- Dental insurance
- Disability insurance
- Health insurance
- Life insurance
- Maternity leave
- Retirement plan benefits
- Social Security benefits
- Unemployment insurance
- Vacation benefits
- Voluntary benefits
- Workers’ compensation
- And more.
Be aware that EBL insurance does not absolve you from managing your benefits plan responsibly. It only covers unintentional errors that happen when administering programs, not conscious omissions.
Employee benefits liability insurance limits
EBL insurance usually has two limits: an employee limit and an aggregate limit.
The employee limit is the maximum amount of money an insurance company will pay to any individual employee, their next of kin, or their beneficiaries over an employee benefits issue. Most policies include a deductible, the out-of-pocket amount an employer would pay for each employee who files a claim before insurance coverage kicks in.
The aggregate limit is the maximum amount an insurer will pay for liabilities that arise from administrative errors and omissions while the EBL policy is in effect.
How is EBL different from fiduciary liability coverage?
It’s easy for small business owners to think EBL insurance and fiduciary liability coverage are the same. Although they share some similarities, they are two different types of insurance. EBL coverage protects employers from errors and omissions when administering employee benefit plans. By contrast, fiduciary liability insurance shields employers from wrongful acts against the provisions of the Employee Retirement Income Security Act (ERISA).
Fiduciary liability protection is different than what’s covered by an EBL policy. It covers administrative errors, omissions, and negligent acts that result in the breach of fiduciary duty when administering your retirement plan. EBL policies specifically exclude all claims that result directly from violating the provisions of ERISA. These are covered by fiduciary insurance.
The word fiduciary, as used in a fiduciary liability policy, is any person or entity responsible for administering retirement plans. According to ERISA, a fiduciary’s personal assets can be used to recoup fiduciary losses. A fiduciary liability policy protects against this if the error is unintentional.
EBL versus employment practices liability (EPL) insurance
EBL is also different from employment practices liability insurance (EPLI). The latter protects businesses against employment-related claims. These may include lawsuits over discrimination, wrongful termination, and sexual harassment. It doesn’t protect against lawsuits related to employee benefits management.
EBL and general liability insurance: How they relate to each other
Employee benefits liability insurance reduces your costs resulting from any issues related to your benefits that your commercial general liability insurance may not cover. These are not duplicative protections. This means that even though EBL may cover errors and omissions committed when administering benefits, there are situations when specific actions are not included in the coverage. Here are some standard exclusions.
- Fraudulent, dishonest, malicious, or criminal acts committed on the employer’s liability insurance.
- Insufficient funds to pay premiums or fund an employee benefit program.
- Bad financial advice or human resource policies that negatively impact an employee benefits program.
- Personal injury, property damage, bodily injury that may result in a workers’ compensation claim, advertising issues, and any other type of employer liability covered by your general liability policy.
- ERISA violations.
- Qualifying workers’ comp claims.
- EPL-related practices covered under general liability insurance.
- Lawsuits, claims, or allegations against a federal employee.
Always speak with your business insurance agent or company representative, who can answer your questions about what’s covered by your EBL policy.
How much does employee benefits liability insurance cost?
EBL insurance policy costs vary widely. Your final premium price depends on the number of employees the policy covers and the range of benefits your business offers.
You can also expect a deductible of approximately $1,000 for each claim filed. No matter the cost of your coverage, it is one of the most affordable policies available to businesses that offers such important protection.
To find an employee benefits liability insurance policy that you can afford while also offering adequate protection, contact some of the insurance providers on our list and request customized quotes based on your budget and coverage needs. Compare quotes to find the deal that’s best for you.
What affects employee benefits liability insurance cost?
The cost of employee benefits liability insurance can be affected by a variety of factors, including:
- The size and scope of the business. Businesses with larger and more expansive operations typically pay higher premiums for their employee benefits liability insurance due to the greater potential for claims.
- Industry risk factor. Some industries are inherently riskier than others, so businesses in these industries may face higher premiums for their insurance coverage.
- Claim history. Companies that have experienced a high number of claims in the past may also face higher costs for employee benefits liability coverage as insurers likely see them as a bigger risk.
- Deductible amount and policy limits. Higher deductibles and lower policy limits often result in lower premiums, while lower deductibles and higher policy limits generally increase costs.
- Location of business. Insurance costs can vary depending on where a company is located due to local laws, regulations, and risk factors that may be unique to certain areas or regions of the country.
