In order to attract the best and the brightest employees, it helps to offer an outstanding benefits package. You want to offer health, dental, retirement and 401K contributions. Someone has to manage these benefits and figure out where to invest the retirement money and that someone is a fiduciary. Obviously, managing employee benefits is complex and demanding. If something goes wrong, angry employees may file a lawsuit against you for mismanaging their funds. This is why you need fiduciary liability insurance.
- The Top 5 Providers of Fiduciary Liability Insurance
- What is Fiduciary Liability Insurance?
- What does a Fiduciary Liability Policy Cover?
- How Much does Fiduciary Liability Insurance Cost?
- Finding Fiduciary Liability Insurance Quotes Online
- Is Fiduciary Liability Insurance Necessary?
- Do Small Businesses Need Fiduciary Liability Insurance?
- How Much Fiduciary Liability Insurance do I Need?
- Why is Fiduciary Liability Insurance Important?
The Top 5 Providers of Fiduciary Liability Insurance
We researched and considered 12 companies to choose these 5 companies to recommend as the best providers of fiduciary liability insurance.
- The Hartford: Best for Online Resources
- Chubb: Best for Broad Coverage
- Travelers: Best for Working with An Agent
- RLI: Best for Comprehensive Coverage
- FounderShield: Best for Startups
1. The Hartford: Best for Online Resources
The Hartford advertises it carries fiduciary liability insurance and invites interested parties to contact an insurance professional. They can offer coverage to small, growing, or mature businesses. The have a library of online articles designed to help your business figure out its insurance needs. To get a quote you have to call them.
2. Chubb: Best for Broad Coverage
Chubb offers coverage for all employee benefit plans, even ones that are not subject to ERISA. They also cover virtually all of your company’s constituents. They have been providing fiduciary liability insurance since 1975. To get a quote, simply call an independent agent near you.
3. Travelers: Best for Working with An Agent
Travelers has been around for 150 years. They have offices in all fifty states and their agents can provide you with guidance as to how much fiduciary liability insurance you need. They have good customer service as well. To get a quote, you must contact a Travelers agent.
4. RLI: Best for Comprehensive Coverage
RLI is a specialty property and casualty insurance company. Their fiduciary liability insurance is available worldwide, and non-cancellable (except for non-payment). They have comprehensive coverage and it’s easy to add this coverage to your D&O insurance. To get a quote from them, they request that you contact an underwriter.
5. FounderShield: Best for Startups
Foundershield specializes in working with rapidly evolving, high-growth companies. They can bundle your fiduciary liability policy with your Director and Officers insurance. To get a quote from them, they prefer you to call them and talk about your needs.
What is Fiduciary Liability Insurance?
Fiduciary liability insurance is similar to errors and omissions insurance (E&O), but for those who manage employees benefit plans. Employee plans can include:
- Healthcare
- Life insurance
- Profit sharing
- Disability
- Employee leave
- Retirement plans
- Pension plans
The ERISA (Employee Retirement Income Security Act) of 1974 is a federal law that sets minimum standards for the management of voluntarily established retirement and health plans. It doesn’t require that an employer have such plans, but if they do, it sets the standards that they must meet in the management of them.
Like errors and omissions insurance (also called professional liability insurance) fiduciary liability covers mistakes, oversights, or unintended lapses by the person responsible for managing the employee benefits. It will cover defense costs and any settlements made against a company.
>>MORE: Best Professional Liability Insurance Companies for Small Businesses
What does a Fiduciary Liability Policy Cover?
Fiduciary liability insurance typically covers things like:
- Errors in administering health or welfare plans
- Giving poor advice on investing employee retirement plans
- Making risky investments
- Wrongful denial
- Improper change in benefits
- Conflicts of interest
- Prohibited transactions
As just one example of a company that has been sued over the mismanagement of employee benefits, in 2016 Wells Fargo was sued by its employees. The employees claimed that Wells Fargo misused their retirement funds by buying underperforming mutual funds to line their own pockets. Wells Fargo has been in damage-control mode ever since.
Fiduciary liability insurance will not help in cases of fraud or deliberate deception, however.
How Much does Fiduciary Liability Insurance Cost?
How much you pay for fiduciary liability insurance depends on how big your company is, how many employees it has and how much you have in assets.
Fiduciary liability insurance can be added to your D&O insurance (Directors and Officers liability insurance) which is similar, but not quite the same. D&O insurance protects corporate directors of a company against claims by investors, employees, or even consumers for mismanagement of a company. Fiduciary liability insurance is more specific. It only covers the employees’ benefits and the management of them. For more on this topic, see “What is Directors and Officers (D&O) insurance? Best 5 Providers?”
Embroker, an online commercial insurance broker, estimates fiduciary liability insurance can cost between $500 and $2,500 a year if it’s an add-on to another policy, such as D&O. Policies can cover as much as $20 million per year.
Finding Fiduciary Liability Insurance Quotes Online
None of the companies we list will give a quote for fiduciary liability insurance online. For one thing, fiduciary liability is intended to round out coverage you already have, such as Directors and Officers insurance.
Embroker says they can provide a quote for Directors and Officers insurance, but only for venture-backed tech companies. They didn’t have a way to request a quote for fiduciary liability insurance at all. CoverWallet also has Directors and Officers insurance, but they don’t allow you to choose fiduciary liability insurance.
This makes sense, given that this insurance is based on company revenue, number of employees and types of benefits offered.
Is Fiduciary Liability Insurance Necessary?
More than 6,334 ERISA lawsuits were filed in 2018. The amount of the top ten biggest settlements totaled $313.4 million (benefitspro.com). So, while it’s not required, it is strongly recommended for any company who offers employee benefits.
Fidelity bonds are a little different. They are required by law, but they only protect the company is the case of dishonest managers. Furthermore, they are used for the benefit of the plans’ beneficiaries.
Do Small Businesses Need Fiduciary Liability Insurance?
If your small business offers its employees a benefits package, you will need fiduciary liability insurance. As soon as you start to offer medical, dental, stock options, etc. you should consider fiduciary liability insurance.
How Much Fiduciary Liability Insurance do I Need?
How much fiduciary liability insurance you need depends on how large your company is, how high a limit you want, and the size of the benefits’ plans assets.
Why is Fiduciary Liability Insurance Important?
Fiduciary liability is important if you have employees with benefits. The management of such benefits like retirement, health or 401K are extremely complex. It can be a challenge to keep up with these plans and any tiny mistake can result in financial losses for your employees.
ERISA holds fiduciaries to very high standard. It says fiduciaries who breach their duties may have to personally pay for any losses out of their own pockets. Yes, you read that right: you could be held personally responsible. This is why it is so important to have fiduciary liability insurance.
What Benefits should You Consider When Shopping for Fiduciary Liability Insurance?
Usually, fiduciary liability is added on to another policy like D&O. It would be unusual to get without such coverage.
When shopping for D&O insurance, you need to consider how much coverage you need and how high a limit (called a retention) you’re willing to accept.
Final Thoughts
- Any business that offers employee benefits would be wise to consider fiduciary liability insurance.
- Fiduciary liability insurance is meant to round out your risk protection insurance. It’s usually added to Directors and Officers insurance.
- Employees are more financially savvy than they used to be, and thus, more likely to sue should their benefit plans not perform as expected or if mistakes are made.
- The top five companies for this type of insurance are The Hartford, Chubb, Travelers, RLI and Foundershield.
- To get a quote for fiduciary liability insurance requires speaking to a broker or an agent, since it’s usually added on to other high-end and complicated insurance
