What is employee benefits liability coverage?

August 28, 2022 at 7:00 AM
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Employment benefits liability coverage is a type of insurance that helps cover employers from errors and omissions that may occur during the administration of employee benefit plans. It applies to life insurance, health benefits, retirement plans, disability insurance, and more.

We’ll explore everything you need to know about employment benefits liability coverage, including how it works and how it can help protect you against human resource mistakes.

How employee benefits liability coverage works

Employee benefits liability coverage can help protect your company if a human resource manager makes a mistake or error regarding an employee’s benefits. Suppose a new employee joins your company, and the human resource manager fails to enroll them in a health benefits plan. Then that new staff member is involved in an accident and finds out they do not have health insurance. Having employee benefits liability coverage can protect you from failing to enroll the employee in a medical benefit plan.

Employee benefits liability coverage also protects companies from both Affordable Care Act (ACA) and worker’s compensation claims.

Employee benefits liability coverage vs. fiduciary liability coverage

Employee benefits liability insurance coverage differs from fiduciary liability coverage because it protects employers from errors and omissions in several types of benefit plans. Fiduciary liability insurance was created to shield employers from wrongful acts against provisions of the Employee Retirement Income Security Act (ERISA).

Additionally, fiduciary liability coverage is much more comprehensive than an employee benefits liability insurance policy. It covers administrative errors, omissions, and negligent acts performed in breach of fiduciary duty while administering employee benefits plans. Employee benefits liability insurance policies exclude all claims that directly violate the provisions of ERISA, as these are covered by fiduciary insurance policies.

Employee benefits liability coverage vs. employment practices liability insurance

Employment benefit liability insurance is also different from employment practice liability insurance. This is used to shield businesses against any exposure from employment-related claims like discrimination, wrongful termination, and sexual harassment.

With employment benefit liability insurance, there are some instances where ill-advised actions are excluded from coverage. These include:

  • Insufficient funds to pay premiums or fund employee benefits programs
  • Fraudulent, dishonest, malicious, or criminal acts committed on the employer’s liability insurance
  • Poor financial advice that impacts employee benefits programs
  • Lawsuits, claims, or allegations against a federal employee
  • ERISA violations and workers’ compensation claims under the act

Benefits covered by employee benefits liability coverage

Employee benefits liability insurance is not a substitute for risk management. But it can help minimize your company’s exposure resulting from mistakes. Here are some of the benefits covered by this type of insurance:

  • Workers’ compensation policy
  • Vacation benefits
  • Social Security benefits
  • Retirement plan benefits
  • Maternity leave
  • Life insurance
  • Unemployment insurance
  • Health insurance
  • Disability insurance
  • Dental insurance

Limits of employee benefit liability insurance

Employee benefits liability insurance coverage has two types of limits — an employee limit and an aggregate limit. The employee limit refers to the maximum amount of money an insurer would pay for liabilities incurred by an individual, their next of kin, or their beneficiaries. The aggregate limit mentions the total amount of money an insurer would be willing to pay for any liabilities that arise from errors or omissions by a human resource manager.

Contact Ashton Benefits for complete HR support.

Ashton Benefits works nationally and globally to provide organizations with the systems they need to focus on their business, with total peace of mind regarding their human resources systems. We build custom service packages for our clients with everything they need for employee and executive benefits, compliance, technology, and more.

By analyzing an organization’s structure, growth, and needs, we do more than just provide insurance products. Ashton Benefits goes further to help organizations build benefit packages that attract top talent in their field.

Contact Ashton Benefits if you want expert help in finding insurance products to protect against HR mistakes.

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