With the evolution in employee benefits plans such as health, pension, or retirement plans, the need for fiduciary insurance for business has increased. Most people think that fidelity bond and fiduciary liability insurance are same. However, fidelity bond only covers for entities such as ERISA. Your business can still suffer from lawsuits due to mismanagement of fiduciary duties. Hence, fiduciary liability insurance protects your employees involved in fiduciary duties and your business from liability claims.
If you have formulated employment benefits plans but failed to implement it, your business is likely to be sued. Moreover, an employee can file a lawsuit claims without presenting any evidence of wrongdoing. The legal defense costs can even put your personal property at risk. Thus, although states does not mandate fiduciary liability insurance, companies should consider getting this insurance coverage.
What does fiduciary liability insurance policy exclude?
The major objective of fiduciary liability policy is to cover your business from financial devastation due to lawsuit claims. Nevertheless, if your business is at fault, fiduciary insurance will not provide the necessary coverage.
Some of the claims that this policy does not cover are as follows:
- Failure to finance according to ERISA requirements
- Acts of dishonesty
- Criminals or acts of intentional wrongdoing
- Intentional embezzlement
The major focus of fiduciary liability coverage is to fill the gaps existing in employee benefits liability or directors and officers policy as mentioned by Investopedia.
How much does fiduciary liability insurance cost?
- Size of your business: If the size of the company is large-scale, you’ll be exposed to more risk. Based on the level of risk, you can expect to pay a higher premium rate.
- Choice of service providers: Insurance company evaluates past records of service providers. If they have a record of any fraudulent activities, underwriters can increase your premium rate accordingly.
- The industry you operate in: Businesses that operate under the same industry will have similar insurance premium rates. Moreover, the number of employees you hire can also impact the cost of insurance.
- Total plan assets: Employee benefit plans formulated by the firm can also determine the premium rate. If you have a high value of assets set aside for benefit plans, your premium rates can also be high.
- Coverage requirement: The cost of insurance greatly depends upon the amount of coverage. If your business has a high risk, you should opt for an adequate amount of coverage.
- Policy limits: Limits and deductibles influence insurance rates. If the limit of your policy is less, you will only have to pay less premium rate. Nevertheless, while choosing limits, make sure that it covers your business risks.
According to Willis Towers Watson you can include fiduciary insurance with D&O insurance, or employment practices liability insurance. If you are looking for fiduciary liability insurance, make sure to understand your coverage requirement. Above all, consult with an insurance expert to customize your insurance coverage.