Employee Benefits Liability Coverage
Employee benefits liability insurance protects businesses from errors and omissions that occur when employee benefit plans are administered. A wide range of plans, including health, dental, life, profit-sharing and retirement are covered by employee benefits liability.
FAQs
What does employee benefits liability cover?
Employee benefits liability will generally cover administrative mistakes that result in financial consequences for employees. Common benefits covered by employee benefits liability include:
- Health insurance
- Dental insurance
- Vision insurance
- Life insurance
- Disability insurance
- Pensions
- IRAs
- Profit sharing plans
- Workers compensation
- Social security benefits
- Maternity leave
- Vacation plans
Example: Your HR director miscalculates the monthly income of employee’s retirement plan to be greater than it actually is. The employee retires early as a result and then sues the company for the error.
Example: A new employee has to undergo emergency surgery a few months after starting at your company. The hospital bill exceeds $100,000 but your HR department failed to enroll her in the company healthcare plan. The employee sues your business to recover the medical expenses that would have been paid by health insurance.
Example: An employee was supposed to receive a certain amount of maternity leave but due to a clerical error, she receives less time and sues the employer for the error.
What doesn’t employee benefits liability cover?
Employee benefits liability insurance fills a gap left by general liability coverage so it won’t cover things like bodily injury or property damage that are covered by the standard general liability policy. It also doesn’t cover dishonest, criminal, malicious or fraudulent acts, insufficient funds or poor financial advice related to employee benefits.
Example: The HR manager of your company terminates the disability insurance plans for your employees to save money.
Example: Your employees lose their health insurance coverage because your business is low on funds and fails to pay the premiums for the insurance plans.
Example: The HR manager of your company directs all of your employees to participate in the employee stock option program and tells them that the value of the stock will increase by 20% but the stock price actually falls by 10%.
Should I purchase employee benefits liability?
Employee benefits are complex programs that involve a great deal of paperwork and data entry. From enrolling employees to maintaining accurate records to explaining benefits correctly, it isn’t hard to see how mistakes can be made. Such errors can cause significant financial burdens for your employee, who can sue your company for compensation. Any business that administers employee benefits would be wise to consider this coverage.