Do you offer retirement or health benefits to employees?
If so, fiduciary liability insurance can be a lifesaver.
Employers are constantly coming up with new and exciting benefits for their staff. But whether you offer paid holidays or catered meals, retirement and health benefits are likely the first concern for your employees.
Offering a comprehensive benefits package can help attract and retain workers, but doing so can also pose a risk to your business. Managing employee plans may expose you to claims of mismanagement, which can threaten everything you’ve built so far.
Thankfully, fiduciary liability insurance can help.
Yes, You Might Be a Fiduciary!
You may be familiar with the term fiduciary as a type of financial advisor—namely, someone who has a duty to make decisions in the best interests of another party (rather than themselves).
As it turns out, you don’t have to be in the wealth management field to be considered a fiduciary. In fact, you may be a fiduciary without even knowing it.
Under the Employee Retirement Income Security Act (ERISA), all plans must have at least one fiduciary, who is held to certain standards in how they manage employee accounts and funds.
Any individual named in an employee benefit plan may be considered a fiduciary, including:
- Employers
- Administrators
- Trustees
- Directors and officers
As a plan fiduciary, you will have to choose investments, select advisors, and follow plan documents—all while minimizing expenses.
If this sounds like a lot of responsibility, that’s because it is! Being in a position of relative power means that you can be held liable for any breach of fiduciary duty.
So, What Is Fiduciary Liability Insurance?
Fiduciary liability insurance helps protect you (the fiduciary) and your company against claims of mismanagement.
Specifically, it helps cover:
- Attorney fees
- Investigative costs
- Judgments
- Settlements
Fiduciary liability coverage only extends to fiduciaries, not outside advisors you may hire on your behalf. Furthermore, much like Errors & Omissions insurance, this coverage will only cover unintentional acts. Deliberate fraud, embezzlement, or theft will not be covered.
Who Needs It
If you offer retirement plans or welfare plans (such as health or life insurance) to your employees, fiduciary liability insurance is a must-have policy.
Remember: as a fiduciary, you have a legal obligation to make decisions that are in the best interest of your employees, but there is a very good chance that you lack the expertise to do so. After all, you’re an expert in your own field, not in finance and investment strategies!
In the event that you make a decision that leads to the loss of funds in a retirement plan, your employees can (and probably will) file a lawsuit against you. Even if you somehow manage to successfully defend yourself and win your case, you will still be on the hook for your legal fees, which can be staggering.
Keep in mind that it isn’t just the company that will be held liable, but you. Don’t leave your financial security to chance!
What Does Fiduciary Liability Insurance Cost?
It is impossible for any blog post to give you an insurance quote, as your premiums will be determined by a variety of factors, such as the total amount of assets being managed, your coverage limits, and your claims history.
The cost of fiduciary liability insurance ranges from $500 to $3,000. However, we caution all of our clients not to base insurance decisions on cost alone! Whether you’re protecting your business or your family, the amount of coverage should be your primary concern.
Insurance premiums are based on your level of risk. This means that the more your insurance costs, the more you need it!
Protect What Matters
As a fiduciary, it’s your duty to look after your employee’s best interests, but it’s also your responsibility to make sure that your own financial interests are protected.
Fiduciary liability insurance can give you peace of mind that—if the worst happens—you won’t have to worry about paying attorney fees, judgments, or settlements out of your own pocket.
At Harry Levine Insurance, we are committed to providing our clients with high-quality coverage that meets their needs and we take our own fiduciary duties seriously. All our recommendations are based on your own best interests and we review your policy options regularly to make sure you never outgrow your coverage.
Call today or visit our website for a free quote.