03rd Jul, 2022 Read time 15 minutes

Liability Coverage for Employee Benefits: A Comprehensive Guide

Are you searching for a way to shield your company from potential employee complaints or lawsuits? Look no further than employee benefits liability insurance!

With this coverage, you can have peace of mind that any work-related issues will be handled professionally and efficiently. Additionally, if your HR or legal team makes a mistake while performing their job duties, you won’t have to worry about it costing your company a fortune.

Imagine you’re hiring new employees for your team. Your HR department is working hard to onboard them, and your recruitment managers are busy completing the necessary paperwork for their benefits and you even consider opening a psychic position for your employees wellbeing. However, if one of them accidentally leaves out some crucial information, it may seem insignificant, but with employee benefits liability insurance, you won’t have to take any risks. Secure your company and employees by acquiring the coverage you require.

We all know that mistakes can happen despite the best technology and processes in place. It’s just human nature! But neglecting those mistakes can sometimes be expensive. For instance, if there are inaccuracies in employee data or benefits administration, it may come back to haunt you as a liability later on. It is where EBL coverage comes into play! This type of coverage is always in the best interests of your employees and the company. It’s a form of general liability insurance that assures you that any possible errors will be resolved.

What Are the Benefits of Employee Liability Insurance?

Running a business in America can be an exciting journey, but it’s not risk-free. A type of insurance called Employment Benefits Liability (EBL) protects employers from errors or omissions while providing benefits to employees such as health and life insurance, retirement plans, and disability insurance.

By opting for EBL, you can have peace of mind knowing you are protected in case of any unforeseen circumstances. Additionally, you can add it to other policies like disability insurance. The consequences of a single lawsuit can drastically impact any business. However, with EBL, you can rest easy and not worry about such risks. To ensure your business is safeguarded with the right insurance coverage, don’t take any chances and opt for EBL.

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Employee Benefits Liability: What Does it Cover?

Assume that a new employee joins your company, but the HR manager neglects to enroll them into the company health plan. After a few weeks, the new hire is involved in a car accident and discovers that they are unable to get health insurance through their employer.

But don’t worry, because having Employee Benefits Liability (EBL) coverage can help minimize your business’s exposure to this type of error. EBL also safeguards employers from specific Affordable Care Act (ACA) and worker’s compensation claims.

When it comes to coverage limits, keep in mind that EBL policies usually have two different limits – one per employee and one for all mistakes made during a particular period. Your policy will detail these limits, so make sure to read it carefully and comprehend your coverage.

Similar to other types of insurance policies, it’s typical to have a deductible with EBL. Depending on the conditions of your policy, you may have a deductible for every employee who files a claim.

So, if you want to safeguard your enterprise from costly errors concerning employee benefits, EBL is surely worth considering!

Types of Benefits Are Covered by EBL

A few of the common benefits are,

  •         Life Insurance
  •         Health Insurance
  •         Dental Insurance
  •         Vision Insurance
  •         Stock Ownership Plans
  •         Disability Insurance
  •         Unemployment Compensation
  •         Savings Plans
  •         Social Security Benefits

EBL Claims Validity

Just like other kinds of insurance plans, the coverage provided by Employee Benefits Liability insurance works on a claims-made system. This means that the insurer will only accept a claim if it is submitted while the policy is in effect, within the policy period. If the incident that led to the claim happened during the policy period but the claim is filed after the policy has expired, it will not be covered.

If a claim is filed retroactively, the insurance policy will need to be paid or dated retroactively. This is a beneficial arrangement for both parties involved: the employer has the opportunity to rectify any errors and compensate for the coverage immediately after the mistake is identified, and the provider gains a new client.

Therefore, it is crucial to keep your policy updated and be aware of any potential gaps in coverage. With EBL insurance, you can have peace of mind knowing that both you and your employees are safeguarded from any costly blunders regarding employee benefits.

Some Things Are Not Covered by Employee Benefits Liability Insurance

Let’s talk about limitations! When discussing Employee Benefits Liability, it’s important to note that there are two types to keep in mind.

  •         First off, we have the “total limit.” This is the maximum amount an insurance company will pay for the entire business.
  •         Then we have the “per-employee limit.” This is the maximum amount the insurer will pay out to each employee and their family.

Unfortunately, if you or one of your employees reaches the maximum coverage amount allowed, the insurance provider won’t pay any more EBL claims. Additionally, it’s important to remember that not all claims are covered under EBL insurance, so understanding what is and isn’t included in your policy is crucial.

Your policy’s unique terms and conditions may have exceptions, such as:

  •         Claims related to property damage or injury.
  •         Claims related to an employee’s underperforming 401k.
  •         Benefits without a monetary value.
  •         Lawsuits related to employee compensation expectations.
  •         Breaches under the Employee Retirement Income Security Act (ERISA).
  •         Deceptive or illegal acts committed by the organization.

If you’re unsure about the extent of your EBL insurance policy, don’t hesitate to contact your provider for clarification.

Employee Benefits Liability Insurance vs. Fiduciary Liability Coverage

Were you aware that fiduciaries in charge of managing benefit plans can be personally accountable for any mismanagement under ERISA? That’s a huge responsibility! But fret not, fiduciary liability insurance has got you covered. If you face a lawsuit regarding any wrongdoing in your role, this insurance can take care of your legal defense, court fees, investigation expenses, judgments, settlements, and more.

The most important thing to remember is that EBL typically covers only errors and oversights that occur during the administration of a benefit plan.

Fiduciary liability coverage policies are especially useful for those who make discretionary decisions and hold higher-level fiduciary roles. It can include anything from failing to obtain benefits at a competitive price to any deliberate errors made concerning employee benefits. It’s also important to consider such a policy in cases where a suitable investment manager isn’t chosen for a retirement plan.

Employee Benefits Liability Coverage vs. Workers’ Compensation

It’s crucial to understand that although they’re linked to employee claims, these two things are not the same.

As we previously mentioned, employee benefits liability insurance only applies to mistakes or omissions associated with managing employee benefits. This insurance takes care of your business’s legal defense and compensates the employee if you’re at fault for the mistake.

On the other hand, workers’ comp takes care of claims for an employee illness or injury that arises from their work duties or work environment. This policy also covers the employee’s medical expenses and lost wages.

However, if you’re sued, workers’ comp insurance won’t cover your business’s legal defense. This is because employees who accept a workers’ comp settlement for their claim cannot take legal action against your business.

Another significant difference between these policies is the legal requirement. Except for Texas, most states require businesses with more than one employee to have workers’ compensation. However, EBL insurance is optional in all states.


Are you familiar with EBL and EPL? EBL, which stands for Employee Benefits Liability insurance, protects businesses from mistakes made in managing employee benefits. EPL, on the other hand, helps employers safeguard against claims related to employment, such as wrongful termination or harassment of sexual nature.

As important as it is to note that EBL covers gaps in benefits administration that may not be covered by Commercial General Liability policies, it is critical to keep in mind that it does not duplicate liability coverage. EBL does not cover some inappropriate actions because of this.

Here are some common exclusions that you should keep in mind:

  • Insufficient funds to pay premiums or support an employee benefit program: No one wants to run out of money, particularly when it comes to crucial things like employee benefits. Unfortunately, if your company’s bank account is running low on funds, EBL won’t be able to assist you.
  • Fraudulent, criminal, malicious, or dishonest acts are involved in the liability insurance of the employer (this generally comes under fidelity bond coverage). This one is fairly self-explanatory. If someone in your company is up to no good and commits a criminal act, EBL won’t cover the consequences.
  • HR policies and Poor Finance Advice that affect an employee benefits program: When it comes to employee benefits, you want to ensure that your policies and advice are sound. If they’re not, EBL won’t be able to come to the rescue.
  • ERISA violations and qualifying workers’ comp claims under the Act: If you’re not following the rules and regulations set out in the ERISA or making qualifying workers’ compensation claims, EBL won’t provide coverage.
  • Federal employee lawsuits, claims, or allegations: Although EBL can assist with many employee benefits issues, it can’t provide coverage for claims or lawsuits against federal employees.
  • EPL-rated practices covered under employer’s liability insurance: Employment Practices Liability Insurance (EPLI) covers certain employment-related claims that EBL won’t, such as discrimination, wrongful termination, and sexual harassment.
  • Instances, such as personal injury, advertising injury, damage to the property, injury to the body that might result in a workers’ compensation claim, and other liability of the company coming under the general liability policy: EBL won’t provide coverage for scenarios that fall under general liability policies, such as property damage, bodily injury, and advertising injury.

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Why You Should Consider EBL Coverage?

Allow us to explain the advantages of having this insurance for your business. Here are four crucial benefits that you can reap from having this type of coverage:

  1.   Offering Protection Against Human Error

We all make mistakes, and sometimes even the tiniest slip-up can turn into a major issue. But fear not, that’s where EBL coverage comes in clutch! It’s designed to safeguard your company from these sorts of blunders, so you don’t have to worry about getting hit with legal action. Let’s say your HR manager messes up the calculation for an employee’s pension plan, and the employee decides to sue your company. Or, imagine your HR department neglects to inform an employee about their spouse’s eligibility for medical insurance, leading to a potential lawsuit. With employee benefits liability insurance, you can chillax knowing that your business is fully covered for these kinds of mistakes.

  1.   Business Having a Higher Turnover

When it comes to a business, a high rate of employees leaving can be a tough pill to swallow. But, fear not my friend, as there is a way to boost employee retention and that is by investing in employee benefits liability insurance. Plenty of studies have shown that offering yearly benefits like health insurance, 401(k) plans, and retirement coverage can give employees a sense of security, which in turn makes them more likely to stay with their current employer for a long time. With this added sense of stability, your employees will stick around for the long haul.

  1.   Protects the Business’s Finances

Employee benefits liability coverage is akin to a security blanket for your enterprise. This insurance guarantees that your establishment’s fiscal well-being and image are protected if a mistake arises during the administration of employee benefits. Legal disputes stemming from such slip-ups can be a costly affair and may put a significant dent in your company’s earnings. Therefore, it’s a wise move to be proactive and invest in this insurance, rather than regretting it later.

  1.   Your Business Offers Different Benefits to Employees

As a boss, it’s crucial to hook up your crew with some sweet perks to help them secure their financial future. You know, like your run-of-the-mill benefits such as health and life insurance, 401(k) retirement plans, or even some out-of-the-box extras like helping with tuition or handing out stock ownership plans. But, here’s the real kicker, you gotta have employee benefits liability insurance, my friend. This type of coverage will save your skin if you make any blunders while managing the employee benefits that are legally mandated or exclusive to your company.

How Much Does Employee Benefits Liability Insurance Cost?

Hey y’all, if you’re thinking about getting yourself an Employee Benefits Liability (EBL) insurance policy, just remember that the price can change a lot depending on how many of your workers you want to cover. Usually, you’ll have to pay about $1,000 for each claim you make, but don’t fret – EBL insurance is one of the cheapest policies out there for businesses.

To find the perfect EBL insurance policy for your company’s wallet and coverage needs, it’s a good call to reach out to a reliable insurance provider. They’ll whip up a quote just for you that’ll fit your requirements and help you protect your biz’s money and good name.

How Can You Obtain Employee Benefits Liability Coverage?

If you’re thinking of boosting your insurance policy with Employee Benefits Liability Coverage, why not hit up your insurance agent and inquire about tacking it onto your current commercial general liability policy? Depending on the size of your squad and the kinds of benefits you’re handing out, you might need this extra coverage to keep your biz and staff safe and sound.

Now, if you’re a newbie biz owner on the hunt for some insurance coverage, start your search by checking with the insurance companies you’re already tight with for your home or auto coverage. They just might also offer sweet deals on business insurance. Plus, don’t be shy about asking other business owners for recs on trustworthy insurance agents who can help you navigate the process like a pro.

Final Thoughts

You put in the effort to hook up your team with some dope benefits, but sometimes things go awry, even for the best of us. Maybe your HR squad slipped up and gave an employee the wrong deets about their health insurance or messed up their retirement plan. That kind of mistake can cause some serious annoyance for your employees and might even land you in court, which is mad expensive. But don’t sweat it! Employee Benefits Liability Insurance has got your back. It’s financial protection for your business in case any mistakes get made while sorting out benefits for your employees. That means you can focus on making sure your team is happy and healthy without worrying about getting sued. But listen up, EBL insurance aren’t no fairy godmother who can make all your business problems disappear. It’s just one tool you can use to manage your risk mo

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