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​Employee Benefits Liability Insurance: All You Need to Know

Even with all the apps and checklists in place to help onboard new hires, mistakes can still happen. Especially when the company is growing and going through a hiring spree. With so many new people to onboard, a critical document in the employee benefits program can easily get missed. Mishaps are even more likely for small businesses with no human resources team or full-time HR manager dedicated to administering the benefits package. Employee benefits liability insurance helps to protect your company and provide peace of mind. 

This coverage is an easy way to safeguard against common yet costly mishaps for fast-growing startups.

Read on to gain clarity on what employee benefits liability (EBL) is, what it covers (and doesn't cover), and how having this coverage can be a value-add with your existing business insurance package.

What Is Employee Benefits Liability Insurance?

If your company makes a mistake while enrolling employees for their benefits plan and something happens to them, you can be held accountable.

There are many opportunities for benefits administration to go wrong since it involves many detailed tasks like explaining benefits to employees, enrolling workers in their health plans, adding or removing beneficiaries, and keeping records up to date and accurate.

This type of insurance covers the administrative errors and omissions that can occur anytime during the onboarding of new hires. This coverage can benefit workplaces with a higher volume of temporary workers and independent contractors.

Here are some scenarios where EBL insurance coverage applies:

  • Life insurance
  • Dental, vision, and mental insurance
  • Pension plans
  • Profit-sharing
  • Maternity Leave
  • Retirement plans
  • Workers’ compensation
  • Disability insurance
  • Social Security benefits
  • Unemployment benefits
  • Holiday time benefits 
  • 401(k) and retirement

Whether it's a clerical error that occurs when enrolling a new employee in their health insurance plan or a missed piece of information that goes unnoticed, it helps to have employee benefits liability coverage as a catch-all.

The insurance company will cover related claims made during the period where the policy is active. The policy is updated for claims outside that timeframe to reflect the retroactive date, and the policy fee is applied accordingly.

The Differences Between EBL Insurance, General Liability Insurance, and Fiduciary Liability

Since the jargon can get confusing, let's dig into the main differences between these often similar-sounding types of business insurance that all serve a different function.

Employee Benefits Liability Policy

EBL coverage kicks in when the company has made an error in administering the health plan and helps the company to compensate the employee as required. It works in tandem with general liability insurance, not instead of it.

Commercial General Liability Policy

General liability insurance could apply to lawsuits filed to cover medical bills if the company made no administrative mistakes. A general liability insurance policy would protect the company from paying all the damages to the affected employee.

Fiduciary Liability Policy

A fiduciary can include employers, executive directors, plan administrators, or anyone cited in an employee benefits package.

Fiduciary liability insurance is commonly confused with EBL coverage. Still, it is very different because it also covers the legal costs that can arise when there's been a breach of fiduciary duty. This type of insurance can be a lifesaver when there are legal issues, and its primary function is to protect the company from lawsuits.

What Isn’t Covered by Employee Benefits Liability Insurance?

Pulpstream incident management tools

It may seem that EBL insurance sounds too good to be true, which is why we're going to cover the exclusions. Also, keep in mind that a deductible is attached to every claim, and the amount will depend on the insurance company.

The two most notable limitations include:

  1. Aggregate limit: The maximum total amount an insurance company will pay to a business.
  2. Employee limit: The maximum total amount an insurance company will pay to each individual employee and their family.

Other potential exclusions can include:

  • Lawsuits that involve 401(k) or salaries that are not meeting expectations
  • Claims involving bodily injury and property damage
  • Benefits that are not associated with any specified financial value
  • Bad financial advice or poor performance planning
  • Illegal acts or fraud by the company
  • Breaches under the Employee Retirement Income Security Act (ERISA)

The best way to get clear on your EBL eligibility is to contact your insurance agent or provider directly. 

Protection Is Crucial

Even minor omissions or errors in the benefits package can have a long-lasting negative impact on your business. Lawsuits are expensive, and beyond the financial toll, the repercussions can also cost the company its reputation.

EBL insurance is part of a smart risk management plan that leaves the company and its employees with some protection. Luckily, it's one of the most inexpensive types of coverage that can provide significant relief if something does go wrong. It's a small investment that offers both employer and employee peace of mind and security.

4 Ways Automation Streamlines Onboarding

employee benefits liability: woman doing paperwork

Onboarding new hires is a big job, not least of all when it comes to filing critical paperwork. Having the right tools to support in place can greatly impact the team's ability to perform in a more streamlined way, enhancing the overall onboarding experience. Here are four ways automation provides support:

1. Accurate and Secure Intake

To err is human, but that's why supportive technologies can be our second set of eyes and secret weapon. Automation reduces needless manual repetition that is prone to error and provides a safe landing place for your most valuable employee records.

2. Improved Consistency

Pulpstream provides checklists created with logic-driven tasking, no-code process flows that automatically notify key players and take the grunt out of grunt work. 

It takes standard systems that involve converting paper forms, compiling electronic records, or consolidating disparate data sources and turns this information into searchable, actionable data. Enter the data into Pulpstream and the tasks are managed with configurable rules, timers, tasks, and features that ensure the job gets done accurately.

3. Faster Filing

Reducing the manual intake and paper-based back-and-forth can save time so that new hires can spend less time filling out forms and move on to learning their roles faster. Flexible, supportive apps can shorten the onboarding process to hours from weeks.

4. Better Employee Experience

Clickboarding reports that companies with a standardized onboarding process experience an increase of 50% more new hire productivity. When new hires know that their paperwork is handled, they can focus on learning their new role. On the flip side, when there are administrative issues, it can serve as a major distraction for a new team member.

Get the Right Coverage for Peace of Mind

When it comes to insurance to cover your company and your employees, the benefits far outweigh the costs. Insurance is something you hope you never have to use but are always relieved to have access to it if you need it. In this case, having the safety net of employee benefits liability insurance can provide major relief.

Digitize your current processes and minimize your chances of ever having to file a claim with an optimized business process using Pulpstream. As your company continues to grow, the ability to manage will remain consistent, efficient, and more secure.