Fiduciary liability insurance helps to shield companies from lawsuits and allegations of poor management stemming from their fiduciary duties. It is an effective tool for safeguarding your business and your employee’s interests.
Typically, fiduciary liability insurance covers the legal expenses related to fighting against allegations and claims of errors and fiduciary data breaches.
Who Should Purchase Fiduciary Liability Insurance?
If you own a company or run a business that does not feature benefit offers or packages for your workers, then this type of insurance is for you. Fiduciary liability coverage offers a vast array of benefits for businesses with large assets and other valuable assets. Consider getting this coverage if you own or run:
- Private company.
- Public company.
- Non-governmental organization.
- Financial institutions.
Why Should I Buy Fiduciary Liability Insurance?
Fiduciary liability insurance offers diverse benefits beyond expectations. The major reason why it is advisable for businesses and companies to have this coverage is to protect them in the event of mismanagement of benefits.
Usually, the cost of filing a claim is on the high side, and the chances of having to settle with the complainant are also high. So, fiduciary liability coverage helps to cover the cost of legal fees if you are sued for any reason.
What Does Fiduciary Liability Insurance Cover?
Generally speaking, any form of mismanagement or negligence on the part of your employee is covered under fiduciary liability insurance. It serves as a protection against fiduciary negligence that causes damage to your business. Fiduciary liability insurance covers the following:
- Errors and omission in administrative activities.
- Wrongful denial.
- Improper counsel or advice.
- Negligence on the part of the employee to carry out activities according to the proposed plan.
- Penalty and other fees charged by IRS or DOL under a voluntary settlement program.
- Conflict of interest.
- Reckless election and failure to supervise third-party companies.
- Prohibited transactions.
- Legal defense and settlement cost.
There are several other perils covered under fiduciary liability insurance aside from the aforementioned ones. It all depends on what is stated on your policy document. If you have full coverage, your policy should also cover the cost associated with changing or modifying a plan when making a complaint.
What Does Fiduciary Liability Insurance Not Cover?
While fiduciary liability coverage offers protection against a wide range of risks, there are limitations to what the policy can cover. Usually, this type of coverage will not cover your business in the event of theft or fraudulent cases. Highlighted below are other things fiduciary liability insurance does not cover:
- Intentional wrongdoings.
- Bodily injury.
- Criminal activities.
- Intentional embezzlement.
- Deliberate act of mismanagement.
It is important to note that the sole aim of fiduciary liability coverage is to protect against mismanagement of benefits in a business.
How Much Does Fiduciary Liability Coverage Cost?
Typically, the cost of fiduciary liability coverage largely depends on the unique needs of the business, the size and number of assets you own, and, of course, the type of coverage you eventually settle for. These variables determine how much your insurance company will charge for obtaining this coverage.
However, fiduciary liability coverage is often affordable to get, so you don’t need to worry about paying a higher amount. This is because it is an add-on product that can be included in other policies as well.
Nevertheless, the average cost of fiduciary liability coverage is usually between $500 and $2,500 per year. Remember that the cost is dependent on the unique needs of your business and the coverage amount you need to protect your business assets.
FAQs
How much fiduciary liability coverage do I need?
The right amount of coverage needed for your business depends on the size of your company, the number of employees, the type of investment, and the complexity of the risk you are exposed to.
It is advisable to weigh these factors in order to determine the coverage amount that is sufficient to cover your business in the event of a claim.
You can also consult an expert in the insurance industry if you are still unsure of the type of coverage you need.
What are the factors that affect fiduciary liability insurance premiums?
Most insurance companies determine the premiums of fiduciary liability coverage based on several factors. Some of which include: risk management practices, claim history, financial strength of the business, number of employees, types of assets, and its size plan.
Have it at the back of your mind that, if your plan includes investments that are on the high side and riskier to insure, you will pay higher premiums.
How long does a fiduciary liability policy last?
Typically, this type of policy is written on a claim-made basis. This denotes that the coverage only applies to the claims that were made first and reported during the lifetime of the policy.
Usually, most fiduciary liability insurance policies have an initial one-year term. However, you can decide to renew your policy annually or as directed by your insurance provider.
