EPLI Insurance: Cost, Coverage, & Providers

Employment practices liability insurance, or EPLI insurance, protects business owners from claims arising from employment-related issues, including wrongful termination, discrimination, and sexual harassment. The cost of EPLI insurance depends on several factors, such as business size and employee turnover. However, most small businesses can get EPLI coverage for less than $1,200 per year.

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Top 5 EPLI Insurance Providers

Employment Practices Liability Insurance Cost

The cost of EPLI insurance typically ranges in premium between $800 and $3,000 annually, with $1,200 being the average annual cost of EPLI. Deductibles can be as high as $25,000 to $50,000 for small businesses. To get a better idea of where your business falls on the annual cost range, consider the various factors affecting EPLI rates, such as the number of employees or employee turnover.

The most important factors that affect the cost of EPLI insurance include:

• Number of Employees: The more employees you have, the more risk exposure you have to EPLI claims and the higher your cost will likely be.
• Employee Turnover: High turnover rates demonstrate greater potential for employment practices claims like wrongful termination, which will increase your premium costs.
• Hiring and Firing Practices: Discrimination and wrongful termination, which often arise from hiring and firing practices, are causes of EPLI claims and can drive your costs up.
• Claims History: If you have past EPLI insurance or liability claims, your premiums will generally be higher than if you had zero claims, especially in the past three years.
• Business Size: Larger business size and higher revenue means there’s more to protect, which will often increase limits and premiums.

All of these factors will combine to form a risk profile that will tell the insurance company’s adjusters how to rate your policy. Insurance companies will charge more for greater risk exposures that require higher coverage limits.

How EPLI Insurance Works

Employment practices liability insurance (EPLI) protects business owners from claims arising from employment-related cases, such as wrongful termination and sexual harassment. Since EPLI insurance is not industry-specific, each business will need to determine the risk exposures unique to their industry and adjust coverage limits, deductibles, and policy exclusions accordingly.

What’s Covered in Employers Liability Insurance

The items covered in an insurance policy are called inclusions, and there are typically several coverage types in an EPLI policy. It’s important to be aware of what coverage types your business needs and that they are included in your policy.

EPLI insurance can cover (but is not limited to):

• Wrongful Termination: Occurs when an employee’s termination breaches one or more terms of a contract or breaks a rule of employment law.
• Discrimination: Unfavorable treatment of an employee, such as failure to promote, based upon sex, race, age or disability.
• Sexual Misconduct or Harassment: Involves unwanted sexual advances or obscene remarks to an employee.
• Defamation of Character: This happens when a false statement is written or spoken about an employee with the intention of harming their reputation.
• Invasion of Privacy: An employee alleges that an employer unreasonably searches their private space, such as a desk drawer, or conducts surveillance in areas where employees expect privacy, such as in a dressing room or bathroom.

Legal defense costs are also normally considered to be within the limits of coverage. It’s important to note that coverage is for financial damages only, not for other liability claims like bodily injury.

Small businesses should not overlook the importance of EPLI coverage, according to Anthony Giordano, Senior Vice President of Professional Liability at HUB International Northeast:

“Businesses of all sizes are at risk of litigation. An EPLI lawsuit, whether it’s valid or not, can be extremely expensive and damaging to any business. In FY 2017, the EEOC handled over 540,000 calls to their toll-free number and more than 155,000 contacts about possible charge filings in field offices, resulting in 84,254 charges being filed. As a result, the EEOC secured approximately $484 million for victims of discrimination in the workplace.”

What EPLI Insurance Does Not Cover

Items not covered in an insurance policy are called exclusions, and it’s important to note these exclusions before buying your EPLI policy. Many of the exclusions will be covered under other policies; however, you don’t want to miss coverage that exposes your business to risk.

Employers liability insurance exclusions will vary by state and by industry, but these are some of the typical items excluded from an EPLI policy:

• Bodily Injury (covered by general liability insurance)
• Contractual Liability and Breach of Employment Contract Claims (covered by E&O insurance)
• Criminal and Fraudulent Acts (in some cases covered by E&O insurance)
• Violation of Employment Laws and Other Regulations (in some cases covered by E&O insurance)

Your insurance provider should help you decide what claims the EPLI policy will cover and any claims the policy specifically excludes. It’s important to review these items with an agent or broker to be sure you understand and cover your risk exposures.

Claims-Made Versus Occurrence Policies

Most insurance companies offer employers liability insurance as a claims-made policy. This means that claims will only be covered if your policy is active when an incident occurs and when the claim is made. However, occurrence policies protect you from claims arising from covered events that occur while the policy is in force, regardless of when the claim is first made.

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

Employment Practices Liability Insurance Providers

There are many insurance providers that offer employment practices liability insurance (EPLI); however, not all of them specialize in covering small business owners. In our search for EPLI insurance, we looked at dozens of highly rated providers that tailor their insurance packages to fit the insurance needs of small business owners.

Five of the best EPLI insurance providers are:

1. The Hartford

With 25 percent of EPLI insurance claims coming in over $500,000, a large insurance company like The Hartford can be a smart choice. The Hartford offers a complete EPLI insurance package, and they’ve developed a proprietary website that helps employers with resources, including online training on sensitive topics from sexual harassment to wrongful termination.

The Hartford is a good provider for business owners looking for a large insurance company with sound financial backing that also specializes in small business insurance.

2. Insurance321

Insurance321 is an insurance agency that matches your specific coverage needs to industry leading insurance companies to find you the best policy for the most affordable price. Their team of expert agents provide multiple quotes in as little as four minutes.

3. Travelers

Travelers is a large insurance company that has a broad range of products for both individuals and businesses. Often the best kind of insurance is prevention. To help businesses sharpen and maintain their proactive measures in preventing expensive EPLI claims, they offer their own Risk Management Plus Online, which is a web-based resource of risk prevention tools, at no extra charge.

Travelers is a good choice for employers wanting a large insurance provider that offers all the EPLI insurance coverage they need, plus web-based risk-management tools.

4. State Farm

Large insurance companies like State Farm can offer solid financial backing, which is an important quality in a strong liability provider. Start Farm also has an A.M. Best rating of A++, which makes it a smart choice for EPLI insurance coverage. Like some other large providers, State Farm offers policyholders, at no additional cost, a human resources loss prevention website and employment advice helpline.

State Farm is a good choice for businesses wanting a top-rated insurance provider that provides the EPLI insurance coverage they need, along with loss prevention tools.

5. Allstate

If you prefer to work with an agent, Allstate has agents in local communities and neighborhoods all over the country. Allstate also offers a user-friendly online platform that clearly shows what is covered and not covered in their EPLI insurance policy.

Allstate is best for businesses wanting the option of EPLI insurance as a standalone policy or as an addition to a business owners policy (BOP).

Tips on Applying for Employment Practices Liability Insurance

When you are ready to begin applying for employment practices liability insurance (EPLI), there are a few key pointers to keep in mind to be sure you get sufficient coverage. With the right knowledge of EPLI insurance, you can find the right coverage at the right price for your business.

Here are five things you need to know about applying for EPLI:

1. Choose Your EPLI Coverage Limits Wisely

EPLI claims can be extremely expensive. The average cost of a discrimination claim is $125,000, and 25 percent of judgments exceed $500,000. Most businesses are wise to have at least $1 million in coverage. However, coverage limits that are higher than necessary will increase your premium cost.

2. High Deductibles Are Risky but Can Reduce EPLI Premiums

Cutting costs by increasing deductibles can be a bad financial decision. EPLI deductibles can be as high as $25,000 to $50,000 for small businesses, but a higher deductible to reduce your premium is not always wise. You will want to balance your need for reducing the premium cost and your ability to pay a high deductible, should a claim be filed against you.

3. Reduce Your Risks Before You Apply

Understanding your risks and taking proactive measures before applying for EPLI can help reduce your costs. For example, discrimination and sexual harassment can be big risk exposures for many businesses. Having written employment policies, such as anti-discrimination and hiring and firing policies, can help prevent claims.

Here are some ways you can reduce the risk of an EPLI claim:

• Require employees to sign an “employment-at-will” policy, which means that they can be terminated without the employer having to provide a just cause.
• Have discrimination and harassment policies written in an employee handbook, outlining zero-tolerance, and ensure all employees receive proper training.
• Provide clear methods of reporting harassment in the workplace.
• Immediately investigate all claims of harassment, document them, and administer discipline and training as necessary.

According to Faith Whittaker, Partner, Dinsmore & Shohl:

“Be sure to have your policies and practices audited and reviewed by an employment lawyer prior to submitting for coverage. Often, underwriters will want to know what sort of employment policies/safeguards the business has in place. For example, does the business have a complaint procedure accessible to employees? Do you have a handbook that was reviewed by an employment law attorney? These considerations will help provide a more applicable policy for your needs.”

4. Understand Your Insurance Needs Before You Apply

Assessing your risk exposures correctly and finding the right protection at the right price for your business may be the most important aspect of the EPLI application process. When interviewing agents and brokers, be sure to ask many questions to confirm the insurance representative’s experience working with businesses in your industry.

According to Judy Selby, Judy Selby Consulting:

“Small business owners should seek coverage for acts that occurred prior to the policy inception date, which may be available at no extra charge. If your business utilizes seasonal, temporary, leased, or contract employees, you should make sure the policy provides appropriate coverage. Adding coverage for claims brought by third parties, such as customers, may be advisable for businesses facing that exposure.”

Who EPLI Insurance Is Right For

While employers liability insurance is recommended for businesses with employees, not all businesses need this coverage. As with other business insurance types and risk exposures, some businesses are more at risk than others. Typically, you should do a risk assessment to determine what your exposure could be. Generally, the more employees you have and the more managers you have overseeing those employees, the more likely it is that you need EPLI insurance.

Bottom Line

Almost every small business that has employees is at risk of employment-related incidents that can lead to potentially debilitating claims. The best EPLI insurance policies will cover most common employment claims, such as discrimination and wrongful termination lawsuits. The right provider should be one that specializes in helping small businesses with EPLI insurance nationwide.

The Hartford makes insuring your business against EPLI claims easy. Their experts will create a customized policy to cover you against EPLI claims at the right price. Get a free, no obligation quote online in minutes.

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