What Is Employee Benefits Liability Coverage?

All businesses need general liability insurance, and many also choose professional liability. Employee benefits liability insurance coverage is yet another important policy that can mitigate financial risks associated with employee benefits. Here is how it works.

Definition of Employee Benefits Liability

Liability insurance is broadly defined as protection against legal claims of personal injury or destruction of property. When applied to employee compensation packages, it pertains to losses in the value of benefits such as health or disability insurance, paid time off, and retirement. It covers the cost of reimbursing the wronged employee as well as any court costs associated with the claim.

Errors and Omissions Covered

Liability is also known as errors and omissions insurance, because it mitigates for the many human errors that can occur while doing business. Employee benefits liability kicks in when unfortunate situations like the following occur:

  • Misleading information given about plan eligibility or value
  • Files, applications, or other documents misplaced or destroyed
  • Eligible employees mistakenly not enrolled in plans
  • Requests for maternity leave or paid time off denied

No matter how competent your human resources team may be, mistakes still happen that result in dissatisfied employees. With a good employee benefits liability policy in place, you can make the situation right without excessive financial loss by your organization.