Fiduciary liability insurance pays the insured the legal liability arising from claims of imprudence on the part of firms that supply employee benefit plans, pension plans, group life insurance plans, medical expense plans and retirement benefits, according to InsureNewMedia. In this case, the insured are fiduciary companies, their employees, sales staff and trustees or employer sponsors of various employee benefit plans.Continue Reading
The International Risk Management Institute reveals fiduciary liability insurance covers the costs of defending a company in court if the company is sued for irresponsible behavior. Fiduciaries can be liable for errors, omissions and acts that arise from the actions of outside entities and organizations that sponsor and administer benefit plans. Insurance protects fiduciaries from the mistakes of actuaries, lawyers, accountants, administrators, advisers, trustees and the companies for which they work.
There are two basic types of fiduciary liability insurance. IRMI explains fidelity bonds are required by law and cover dishonest situations. Fidelity bonds pay for financial harm brought about by dishonest administrators but do not cover legal costs to defend a court case. Employee benefit liability insurance covers errors or omissions during the administration of a plan, such as improper advice and failure to enroll an employee.
A fiduciary is generally defined as a company that manages employee benefit plans, according to Travelers. Fiduciary liability insurance protects these companies from financial difficulties brought about by these plans. A fiduciary is responsible for what happens with employee benefit plans under the Employee Retirement Income Security Act of 1974.Learn more about Insurance