Employment Practices Liability Insurance (EPLI) is insurance coverage that covers your company against workplace-based lawsuits made by prospective employees, current employees, or former employees. These lawsuits can range from sexual harassment, discrimination, or wrongful termination. Claims made under this policy are often awarded in a court of law and are only limited to the facts in which they arose. In this article we discuss the average cost of EPLI insurance.
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How Much Does EPLI Insurance Cost?
The average cost ofEPLI insurance is typically between $800 and $3000 annually. It is $800 to $3,000 for companies with 5-20 employees and can reach several thousand more at companies with more employees. However, the price can vary greater depending on a number of factors that we will touch on below. While this may seem like a large premium, the insurance can potentially pay for itself after one claim. The average cost of an EPLI settlement is $75,000, while the average cost of a court-ordered charge is $217,000. For more information, check out our other articles.
What Influences the Cost of EPLI Insurance?
There are two main factors that affect the cost of your EPLI insurance: Factors around the business and factors around the insurance details. When looking at the business, the number of employees is a major factor, with more employees increasing the cost. The HR procedures in place is another major factor in determining the cost. Organizations with strong HR infrastructure and plans to deal with employee grievances are often able to prevent many of the problems from arising in the first place. This makes the company less likely to face EPLI claims and lowers cost.
These organizations will also likely face less employee turnover, with higher levels of turnover causing higher insurance costs. The industry of the business also contributes to the cost, Businesses that work more directly will customers such as retail or hospitality are more likely to face claims and thus face higher costs.
Looking at the factors around the insurance details, the insurance limit is the main factor behind the price. Typical small business insurance limits are about $100,000. However, with rising EPLI claims, we recommend that businesses gives themselves an extra margin of safety. In addition, the history of past claims will affect the price of the insurance. Lastly, the deductible is how much out of pocket the business needs to pay before they file a claim. The larger the deposit, the smaller the monthly premium.
Does EPLI Insurance Cost the Same Everywhere?
The cost of EPLI insurance can vary depending on the state you are in. For example, Washington, D.C., Nevada, Delaware, New Mexico and California has seen their insurance prices go up as they have seen a large amount of claims there over the last decade.
How Do You Reduce Costs?
We have found that the best way to reduce EPLI costs is to create strong human resource and employee grievance procedures. These will lower the cost in several ways. For one, strong procedures can identify and remedy problems with employees before they escalate into potential lawsuits. In addition, having clear and transparent protocols in place can make it easier to dismiss lawsuits. Your EPLI insurer may also offer discounts to companies that have strong procedures.
Another way to save money is to pay the insurance premium in one annual payment instead of monthly. While it will be more expensive upfront, it will cost less in the long run as insurers offer discounts for the full payment.
When Does Your Company Need EPLI Insurance?
EPLI insurance is highly recommended for all businesses. There has been a quintuple increase in EPLI lawsuits over the past two decades, with about 40% of claims being for small businesses. While businesses with a small amount of employees may be less likely to face a claim, they may be more vulnerable to lawsuits as they will likely lack the legal team, money, and time to fight a protracted legal battle.
What is typically covered?
EPLI insurance is insurance against, Sexual harassment, Discrimination, Wrongful termination, Breach of employment contract, Negligent evaluation, Failure to employ or promote, Wrongful discipline, Deprivation of career opportunity, Wrongful infliction of emotional distress, and Mismanagement of employee benefit plans.
Where to Find EPLI Insurance
There are several websites that provide easy ways to purchase EPLI insurance. Due to the ease in comparing different quotes, we recommend using Coverwallet. Coverwallet provides one on one advice as well as a calculator to compare many different types of EPLI insurance.