EPLI Insurance: Cost, Coverage and Providers

In the United States, life insurance is regulated by state law. In order to obtain a policy, you need to meet certain age-based requirements and pass a medical exam. These regulations help ensure people who take out policies are financially stable and able to afford them in case of death or disability.

EPLI (employment practices liability insurance) protects claims originating from concerns like Termination without cause, Discrimination, and Harassment of women in the workplace. The cost of EPLI insurance is determined by a number of criteria, including the size of the company, employee turnover, and industry. EPLI endorsements may cost as low as $300 per year for small organizations, whereas standalone EPLI can cost anything from $800 to $5,000 per year.

Providers of EPLI Insurance

Because many carriers specialize in EPLI insurance for bigger businesses, acquiring coverage tailored to small businesses may be difficult. Because employment practice liability lawsuits may be costly, small company owners should look for major insurers with high credit ratings from organizations such as Moody’s and A.MTrust. As a result, the owner may rest easy knowing that covered claims will be reimbursed.

Liability Insurance Providers with the Best Employment Practices

Four instances of small business insurance companies with excellent credit are included on our list, as well as one broker that works with several top-rated insurance carriers.

Hartford

Hartford is a large national carrier that earns A ratings or higher from rating agencies. While Hartford sells insurance products to businesses of any size, they have a team dedicated to helping small business owners meet their individual insurance needs.

Hartford offers EPLI as part of a management liability package that comes with five other optional coverages, including crime insurance, fiduciary liability, directors and officers, cyber liability, and kidnap coverage. This makes Hartford ideal for business owners who want a management liability package tailored to their operations.

AmTrust

AmTrust has evolved to be one of the biggest commercial insurers in the United States during the course of its 20-year history. Because of its strong financial ratings and a section specialized in small businesses, AmTrust is able to provide small business owners with reasonable coverage.

EPLI insurance is one example of AmTrust’s cost-effective coverage. AmTrust’s policy has no minimum fee, unlike other insurers, which need annual premiums of $1,500 to $2,500. Furthermore, its EPLI provides coverage for all employees, including part-time, temporary, seasonal, and volunteer workers. As a result, AmTrust is a fantastic small company insurance solution for those looking for high-quality EPLI at a reasonable price.

CoverWallet

CoverWallet is an online small company insurance agency that may provide EPLI insurance from prominent companies such as CNA, Liberty Mutual, and Chubb. CoverWallet is able to provide numerous quotations for a variety of insurance products thanks to these agreements.

CoverWallet is a good option for business owners who wish to evaluate pricing before purchasing EPLI insurance. The company’s application often provides numerous quotations from reputable carriers, allowing business owners to compare and purchase coverage in less than ten minutes.

Allstate

Allstate is well known for its home and vehicle insurance policies, but it is also a reputable business insurance provider with A or higher credit ratings from the major credit rating agencies. Local agents sell the company’s insurance products, and they can provide rates for various plans online.

Allstate is one of the few carriers that sell standalone EPLI as well as adding it to their company owner’s policy. Allstate is a good alternative for small company owners with fewer EPLI risks because of this.

State Farm Insurance

With over 65,000 employees and 83 million policies and accounts across the U.S., State Farm Insurance is one of the largest insurance companies in the world. They balance their size by selling insurance products through a network of 19,000 local agents, who provide personalized service to all their clients.

State Farm Insurance is a top choice for business owners who want to pair their EPLI insurance with HR training. All EPLI policyholders have access to a human resources website and employment practice hotline to get assistance in managing employees, setting up HR procedures, and minimizing turnover. Using best practices like these can reduce the likelihood of EPLI claims, and ultimately reduce costs.

What Is Employment Practices Liability Insurance and What Does It Cover?

Your legal defense in work-related cases is covered by employment practices liability insurance. Policies usually cover current and past workers, but they may also include job hopefuls, whether or not they are employed. Because EPLI insurance is not industry-specific, company owners must assess their risks in order to decide the right level of coverage.

Any company with workers is vulnerable to employment-related litigation to some extent. According to a recent survey by Hiscox, employers in the United States have a 10.5 percent probability of being sued for discriminatory hiring practices. When a legal defense and settlement are necessary, the average cost of small company EPLI claims is $160,000, according to the report. When claims are paid, however, company owners with EPLI insurance just pay their deductible or self-insured retention.

What Does EPLI Insurance Insure?

EPLI insurance protects against mistakes made during the recruiting and employment process. These activities may happen throughout the hiring process, as well as while an employer is recruiting, interviewing, and assessing applicants. When an employee or a group of workers alleges that their legal rights have been infringed, coverage is triggered.

The following are some of the claims covered by employment practices liability insurance:

• Harassment of women
• Discrimination
• Termination without cause
• Retaliation
• Inability to promote or hire
• Invasion of personal space
• Taking away a chance for a better job
• Negligent assessment
• Employee perks are mismanaged.

Business owners, as well as directors, officers, and managers, are covered by employment practices liability insurance coverage. Employees are covered under certain insurance. Additionally, third-party EPLI insurance may be purchased to cover claims made by non-employees, such as clients.

What Doesn’t EPLI Insurance Cover?

Exclusions are items that are not covered by an insurance policy, and it’s crucial to be aware of them when purchasing EPLI insurance. Other insurance may cover some of the common EPLI exclusions, but you should know what’s excluded so you can avoid coverage gaps and better protect your organization.

The following are some of the occurrences that are generally excluded from EPLI coverage:

• General liability insurance covers third-party personal harm and property damage.
• Expenses incurred by employees as a result of work-related sickness or injury: Workers’ compensation insurance protects you.
• Insurance does not cover a policyholder’s purposeful action or illegal activity; nevertheless, business crime insurance often covers an employee’s dishonest activities.
• EPLI normally excludes wage and hour disputes, however, some insurers give coverage via endorsements.

Employer’s Liability Insurance vs. EPLI Insurance

Employer’s liability insurance and employment practices liability insurance are often confused by company owners. These policies, despite their identical titles, address various parts of the employer-employee relationship.

The handling of workers and job hopefuls by an employer is covered by employment practices liability insurance. EPLI pays the expense of defending the company if an employee alleges they have been treated unjustly. Employer’s responsibility, on the other hand, covers claims that an employer’s carelessness resulted in an employee’s work-related sickness or injury, and is often included in workers’ compensation insurance.

Occurrence vs. Claims-made EPLI Insurance

Employers’ liability insurance is often sold as a claims-made policy by most insurance firms. This implies that the insurer will only pay claims if both the triggering event and the claim notice happen while your policy is active. The second choice is occurrence insurance, which covers events that happen while your policy is active, regardless of when you submit a claim with the insurer.

For example, let’s say you close your business and cancel your EPLI policy, and a former employee files a Harassment of women lawsuit against your business a year later. Although the incident occurred while your EPLI insurance was active, the claim was made after the policy was canceled. With a claims-made policy, your claim would not be covered. However, an occurrence policy would cover the claim.

Costs of EPLI Insurance

The costs of EPLI Insurance typically range between $800 and $5,000 in annual premium, but many small businesses can find coverage for around $1,200 per year. However, some insurers offer EPLI endorsements business owners can add to their business owner’s policy which starts at around $300 per year.

Costs of EPLI Insurance & Deductible

Consider the many elements determining EPLI rates, such as the number of workers, employee turnover, and industry, to obtain a better understanding of where your firm stands on the yearly cost range. Higher numbers in any of these will almost always result in a higher premium.

The following are the most significant elements that influence the cost of EPLI insurance:

• The number of workers: The more employees you have, the more EPLI claims you’ll be exposed to, which will raise your expenses.
• Employee turnover: High turnover rates demonstrate greater potential for employment practices claims like Termination without cause. The higher risk can increase your premium.
• Hiring and firing practices: Discrimination and Termination without cause claims often stem from hiring and firing practices, so EPLI underwriters typically investigate your procedures and adjust your premium accordingly.
• Claims history: Insurers often raise rates for firms that have had previous EPLI insurance claims, particularly if they happened within the last three years.
• Coverage amount: Because larger companies with greater income have more to protect, they frequently choose bigger coverage levels, which raises their expenses.

All of these elements come together to create a risk profile that your insurance carrier’s underwriters use to determine how much to charge you for your policy.

EPLI Deductibles & Self-insured Retentions

Some EPLI policies carry deductibles, although self-insured retentions are more common. Both indicate the amount a policyholder is liable for in the event of a claim, but they operate in different ways. Self-insured retention (SIR) is a sum of money that you must pay that is not protected by your EPLI. Any further payments are made by your insurance once you’ve paid your SIR. When you have a deductible, your insurer pays for your defense and then asks you, the policyholder, to repay them.

The amount of the SIR or deductible is normally determined by the customer. Setting a greater sum for either reducing your premium, but it also raises the amount you pay in an employment lawsuit. Furthermore, SIRS must be paid before your insurer pays its half, so you’ll need cash on hand if you file an EPLI claim.

EPLI Insurance: Who Needs It?

While EPLI insurance is recommended for most employers, it is not required for all firms. You must assess your risk and your capacity to recover if the worst-case scenario happens, just like you would with any insurance policy. When it comes to EPLI, the danger increases when you recruit more workers and then supervisors to supervise them.

The necessity of EPLI coverage for small enterprises should not be underestimated.

“Litigation threatens businesses of all sizes.” Whether or not an EPLI action is justified, it may be enormously costly and harmful to any company. In the fiscal year 2017, the Equal Employment Opportunity Commission (EEOC) received over 540,000 calls to its toll-free number and over 155,000 contacts from field offices concerning probable charge submissions, resulting in 84,254 charges being filed. As a consequence, the EEOC was able to obtain $484 million for victims of job discrimination.”

— Anthony Giordano, HUB International Northeast Senior Vice President

EPLI Insurance Policies That Aren’t Associated With EPLI Insurance

EPLI is often acquired as stand-alone insurance or as an add-on to an existing policy. Some insurers, on the other hand, sell EPLI as part of a policy called management liability insurance. Management liability insurance is often sold as part of a package policy that includes other coverages.

Management liability insurance may also include the following coverages:

• Board members, directors, and officers are covered by directors and officers insurance in the event that they are sued for management actions.
• Fiduciary liability insurance: Covers lawsuits over Employee perks are mismanaged. due to errors, omissions, or breach of fiduciary duty
• Kidnapping, ransom, or extortion expenditures are covered by special crime insurance.

These policies may be included with management liability insurance, but they may also be acquired separately.

Practices for Obtaining Employment Advice Insurance for Liability

Make sure your employment practices liability insurance coverage meets your specific company requirements after you’ve decided to purchase it. In general, this takes some planning on your side, but it might also include enlisting the assistance of a qualified insurance agent.

When buying for EPLI, keep the following suggestions in mind:

1. Assess Your Insurance Requirements

Distinct activities and sectors have different hazards, and appropriately identifying those risks is critical to securing the right EPLI coverage for your company. One approach to ensure you’ve identified all of your risks and have coverage for them is to work with an agent that has expertise with both EPLI and your specific sector.

“Small company owners should inquire about coverage for conduct that happened before the policy’s commencement date, which may be offered at no additional cost.” If your company employs seasonal, temporary, leased, or contract workers, check sure your insurance policy covers them properly. For firms facing such risk, adding coverage for claims filed by third parties, such as consumers, maybe prudent.”

Judy Selby is the owner of Judy Selby Consulting.

2. Minimize Your Risks Before Applying

Taking proactive measures to reduce your risk before applying for EPLI can help lower your costs. For example, Discrimination and Harassment of women can be big risk exposures for many businesses. Having written employment policies, such as anti-Discrimination and hiring and firing procedures, can help prevent claims.

Other strategies for lowering EPLI insurance claims include:

• Employees should be required to sign an employment-at-will agreement: This paper shows how an employer may fire an employee without having to provide a reason.
• Create an employee handbook: For example, your handbook may include rules on discrimination and harassment, as well as information on how to report incidents.
• Employees should be given comprehensive training on how to prevent harassment and discrimination, as well as how to report it when they witness it.
• Establish procedures for dealing with complaints: In addition to evaluating complaints right away, you’ll want to set up a mechanism for documenting them and enforcing sanctions as needed.

“Before filing for coverage, have your policies and procedures inspected and evaluated by an employment lawyer.” Underwriters often want to know what kind of employment practices and protections the company has in place. Does the company, for example, have a complaint mechanism that workers may access? Do you have a handbook that has been reviewed by an attorney who specializes in employment law? These factors will aid in the development of a policy that is better appropriate for your requirements.”

– Faith Whittaker, Partner, Dinsmore & Shohl

3. Select EPLI Coverage Limits Carefully

EPLI claims are notoriously costly. A discrimination lawsuit costs on average $125,000, with 25% of judgments exceeding $500,000. Most companies should have at least $1 million in insurance coverage. Higher coverage limitations, on the other hand, raise your premium cost, so you’ll want to strike a balance between your coverage demands and your financial worries.

4. Weigh SIRS & Deductibles Against EPLI Costs

EPLI plans often feature minimum deductibles, also known as self-insured retentions (SIRs), which some businesses choose to raise in order to lower their cost. Cutting costs by raising the amount you’re accountable for, on the other hand, might be a negative financial move since it entails greater out-of-pocket expenses in the event of a claim.

Most Commonly Asked Questions (FAQs)

Because EPLI is likely less well-known among small company owners than some of the more basic coverages like general liability, many may have extra concerns about how it works before deciding whether it’s good for them. Here, we’ve addressed a handful of the most often asked questions.

Is EPLI coverage available for independent contractors?

Independent contractors are covered by certain insurers’ employment practices liability insurance, but not all. Unfortunately, company owners may be sued for their 1099 workers’ behavior. If you need coverage for independent contractors to safeguard your company, you should carefully analyze your policy.

Does EPLI insurance cover wage & hour claims?

Wage and hour claims, as well as disputes over overtime compensation for non-exempt workers, have gotten increasingly costly in recent years, thus most EPLI plans do not cover them. Wage and hour coverage endorsements may be available to business owners.

Is EPLI covered under workers’ comp insurance?

Many companies mix up employment practices liability insurance with employer’s liability coverage, often known as workers’ compensation part two. While the titles are identical, the dangers they cover are not. EPLI covers accusations of misconduct throughout the hiring process as well as general financial damage. Employer responsibility refers to claims of carelessness that result in employee disease or harm.

Conclusion

Almost any small business with employees may be at risk of employment-related incidents that can lead to expensive claims. EPLI policies cover these claims by paying for your legal defense, including awards and settlement, when you or your managers face employment practices lawsuits such as Termination without cause, harassment, and Discrimination.