ASK AN HR PRO:
What small business insurance do I need?
What types of insurance should I have at my small business?
Here are some other types of insurance that small businesses should consider. We will review all of these in more detail in the coming weeks.
- Employment Practices Liability Insurance (EPLI) – EPLI protects against claims arising from the employer-employee relationship—from the job application process to termination, and including allegations of discrimination, harassment and similar charges. Lawsuits are often premised upon an economic injury to an employee. EPLI typically protects the company, directors and officers, and employees, including HR professionals.
- General Liability Insurance – covers liability for bodily injuries and property damage, as well as personal harm, such as defamation of character. It protects the business, company officers, and employees.
- Directors’ and officers’ liability Insurance – generally protects higher-ranking positions for management errors and omissions. For example, it would cover harm caused by a business decision that results in losses and shareholder suits alleging improper market research. For private companies and nonprofits, protection can extend to the organization itself. Sometimes EPLI coverage can be added to this type of policy.
- Errors and Omissions Insurance – Errors and Omissions Insurance protects companies and their employees from lawsuits alleging inadequate work or negligent acts committed during business activities that result in a client’s financial loss. An example could be a printer’s failure to catch a typographical error on a large order or a plumber’s repair that fails and causes property damage.
- Cyber Liability Insurance – Cyber Liability Insurance covers claims related to inadequately safeguarding sensitive or private data. This could include credit card information, Social Security numbers, or other personal information. It covers employers, directors and officers, and employees.
- Workers’ Compensation Insurance – Worker’s Comp is required by many states for numerous classes of employers and pays the expenses of an employee’s work-related illness or injury, including medical and recovery costs, and limited economic harm, such as some lost wages. Employees who collect workers’ compensation payments generally relinquish their right to sue the company for some related civil claims, such as negligence.
In short, EPLI is a type of insurance that protects businesses against claims arising from the employer-employee relationship. These claims can be anywhere from the initial job application process to the termination.
Some examples of these claims are allegations of discrimination or harassment. EPLI typically protects the company, company directors and officers, and company employees such as HR professionals.
Why is EPLI necessary?
Even unfounded allegations come with a price.
That is why most Human Resources experts believe that EPLI is essential for small businesses.
Your company can do everything right and follow the law, but that does not stop employees from filing lawsuits.
The cost of defending employee claims (even if you win the lawsuit) can be very expensive.
The average cost for defending and settling employment law cases is $160,000 according to business insurance company Hiscox.
EPLI is a great way to mitigate risk to your company. The use of EPLI has been growing even though it is still a niche product right now. According to ISO MarketStance, about 33% of U.S. employers carry EPLI.
What Types of Claims are Covered by EPLI?
- Sexual harassment
- Wrongful termination
- Discrimination based on certain protected classes
- Defamation or libel
- Invasion of privacy
- Employment-related misrepresentation
What Types of Claims are NOT Typically Covered by EPLI?
- Wage and Hour claims (such as failing to pay overtime or shortchanging employees on tips)
- Claims under the Adjustment and Retraining Notification Act
- COBRA claims
- National Labor Relations Act claims
- Occupational Safety and Health Act claims
- Americans with Disabilities Act claims
Considerations Before Purchasing:
1. Find out if the policy covers claims made by people outside of your company. Then, depending on your industry, you may want to pay more to ensure that your EPLI includes complaints made by third parties (such as a complaint of sexual harassment by a waiter at a restaurant). Many labor and employment lawyers recommend third-party coverage if your business is open to the public.
2. The key parameters of coverage (such as limits, costs, and how much you must pay before it kicks in) vary significantly by employer size. Premiums can range from just a few thousand dollars a year to hundreds of thousands of dollars a year for huge corporations.
In summary, as a small business owner, you should consider purchasing EPLI to protect your company.
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