Employee Benefits Liability Insurance: What You Need to Know

In the complex landscape of managing a workforce, employers must navigate various responsibilities and risks, including potential liability claims related to employee benefits. Employee Benefits Liability Insurance (EBLI) is designed to protect companies against such claims, providing an essential layer of security beyond standard workers' compensation benefits. Here’s what you need to know about EBLI, its importance, and how it works.

What is Employee Benefits Liability Insurance?

Employee Benefits Liability Insurance is a specialized type of coverage that protects employers from claims arising from errors or omissions in the administration of employee benefit plans. This insurance covers mistakes that might occur while managing benefits such as health insurance, retirement plans, disability insurance, and other employee perks.

Common administrative errors covered by EBLI include:

Incorrect enrollment or termination of employees from benefit plans
Errors in calculating benefits
Failure to advise employees of benefit plan changes
Incorrect interpretation of benefit plan provisions

EBLI is particularly valuable because it addresses gaps not covered by other insurance policies, such as general liability or professional liability insurance.

Who Needs Employee Benefits Liability Insurance?

Any business offering employee benefits should consider Employee Benefits Liability Insurance. This is especially crucial for companies with complex or extensive benefit programs. Specific types of businesses that benefit from EBLI include:

Large Corporations: With numerous employees and intricate benefit plans, large corporations are at a higher risk of administrative errors.
Small and Medium-Sized Enterprises (SMEs): Even smaller businesses with simpler benefit plans can face significant liability risks if errors occur.
Human Resources and Benefit Plan Administrators: Companies that outsource their HR or benefits administration need EBLI to protect against potential mistakes made by third-party administrators.
Non-Profit Organizations: These organizations often provide a range of benefits to attract and retain staff and can also be vulnerable to administrative errors.

Is Employee Benefits Liability Claims-Made?

Yes, Employee Benefits Liability Insurance is typically written on a claims-made basis. This means that the policy provides coverage for claims made during the policy period, regardless of when the alleged error or omission occurred. For a claim to be covered, it must be reported to the insurer while the policy is active. This aspect of EBLI makes it crucial for businesses to maintain continuous coverage without lapses to ensure protection against potential claims.

What Is Covered by an Employee Benefits Liability Insurance Policy?

An EBLI policy covers a variety of claims related to the administration of employee benefits. Typical coverage includes:

Errors in Enrollment: Mistakes made during the enrollment process, such as failing to enroll an employee in a benefits plan or enrolling them in the wrong plan.
Incorrect Benefit Calculations: Errors in calculating the amount of benefits an employee is entitled to receive.
Failure to Provide Information: Omissions or delays in providing employees with necessary information about their benefits, including changes to the benefits plan.
Negligence in Plan Administration: General negligence in the administration and management of employee benefits.

It is important to note that EBLI does not cover intentional acts of fraud or criminal activities, nor does it typically cover claims related to fiduciary responsibilities under ERISA (the Employee Retirement Income Security Act). Separate fiduciary liability insurance is required for those exposures.

How Much Does Employee Benefits Liability Insurance Typically Cost?

The cost of Employee Benefits Liability Insurance varies depending on several factors, including the size of the business, the number of employees, the complexity of the benefits offered, and the company’s claims history. On average, small businesses might expect to pay between $300 and $1,000 annually for EBLI coverage. Larger businesses or those with more extensive benefit plans may see premiums ranging from $1,000 to $5,000 per year or more.

Key factors influencing the cost include:

Number of Employees: More employees generally increase the risk of administrative errors, leading to higher premiums.
Type and Complexity of Benefits: Businesses offering a wide range of complex benefits will typically pay more for coverage.
Claims History: A history of previous claims can result in higher premiums due to the perceived increased risk.
Coverage Limits and Deductibles: Higher coverage limits and lower deductibles increase the policy’s cost

Employee Benefits Liability Insurance is a critical component of a comprehensive risk management strategy for businesses offering employee benefits. By protecting against claims arising from administrative errors and omissions, EBLI helps ensure that businesses can provide benefits without facing potentially devastating financial liabilities..

Let us help you protect your business with employee benefits liability insurance and keep your mind at ease. At Tivly, our goal is to help you find protection for your business as efficiently as possibly by matching you with the right insurance provider. Simply give us a call at 877-907-5267 or complete the form above and one of our specialists will contact you right away.