Understanding Employee Practices Liability Insurance

Employee Practices Liability
Employee practices liability insurance is of the utmost importance for any business. This type of policy provides coverage to a business in the event that a claim is made by an employee in relation to age, sex, harassment, disability, breach of contract, wrongful termination or race.

Many large businesses oftentimes have several types of employee practices liability insurance policies and they are well prepared to handle almost any type of employment lawsuit. Unfortunately, however, small businesses tend to overlook the importance of this type of insurance.

There are a number of factors that influence the cost of purchasing an employee practices liability insurance policy. Four of the more common factors include:

  • The number of workers employed
  • The percentage of employee turnover
  • Whether or not any established rules of practice have been implemented
  • Whether or not any prior lawsuits/complaints have been lodged
Employee practices liability insurance tends to be written on what is known as a claim-made basis. Because of this, any claim made that will obtain coverage has to be related to an incident that occurred during the active period of the policy. For example, if an employee makes a complaint about an incident that occurred three years ago, even if the company currently has insurance but didn’t at the time the incident took place, no coverage will be provided.

Employee practices liability insurance is of the utmost importance to any business. It helps a business to decrease its chances of being targeted in a lawsuit. Before being insured, most insurance providers will thoroughly review a company’s employment practices, followed then by making sure necessary appropriate changes take place before insurance begins.

Such changes could entail:

  • Creating job descriptions for each position that exists within the company
  • Reviewing loss exposures
  • Conducting background checks on all new job candidates
  • Conducting performance reviews
  • Implement a zero tolerance policy in regards to substance abuse, race discrimination and sexual harassment

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