Employer's Liability Insurance
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Employer’s liability insurance

An employer’s liability insurance policy protects your business when an employee sues over a work injury or illness. It's an important policy, because nearly one in five small businesses will face an employee lawsuit.

Employer's liability coverage

Employer’s liability is the legal responsibility of an employer to pay damages to an employee who suffers a work-related injury or illness, which can often result in an expensive lawsuit. Your employer’s liability insurance can help offset those legal costs, as well as any settlement.

Your employer’s liability insurance coverage is included in most workers’ compensation insurance policies, although it's excluded from state-run programs. Workers’ comp is required in almost every state for employers with one or more employees.

What is employer’s liability insurance?

For employees, their workers’ compensation benefits cover medical bills arising from a work-related employee injury or illness. It can also offset some of an injured employee’s lost wages if they’re unable to work for a while.

For employers, the main benefit to workers’ comp is the protection from legal claims that employer’s liability insurance covers. If an employee files a work-related injury lawsuit against your business, this coverage can help pay for your legal defense.

Consider these examples of employer’s liability claims:

Third-party-over action claims

An employee sues a third-party over a workplace injury, and the third-party turns around and sues the employer.

Loss of consortium claims

An employee’s family members seek punitive damages from the employer if their relative has a debilitating illness, suffered a serious bodily injury, or died in a work-related accident.

Dual-capacity lawsuits

An employee is injured from using one of the employer’s products, then sues the company in its capacity as both an employer and a manufacturer.

Consequential bodily injury claims

This could be filed by a non-employee who is impacted by an employee’s work-related injury or illness, such as a family member who faces health problems from caring for an injured worker.

Find the right workers' compensation insurance policy online today

Employer’s liability insurance vs workers compensation

Employer’s liability insurance is included in most workers’ compensation policies, so the coverages are related but not the same.

Workers’ compensation insurance covers the medical expenses for an employee’s work-related injuries and illnesses, along with some of their lost wages.

Employer’s liability insures a business owner against lawsuits over an employee injury or illness.

Learn more about workers' compensation and employer's liability coverage limits.

Do I need employer’s liability insurance if I have no employees?

Sole proprietors who have no employees typically aren’t required to carry employer’s liability coverage. They may have to carry workers’ comp insurance if they work in a profession with higher risk, such as construction and building trades.

If you’re self-employed or an independent contractor, you might need a workers’ comp policy to fulfill the terms of a contract.

Workers’ compensation can also come in handy if you have a work-related injury or occupational disease and are unable to work for a while. Your regular health insurance is unlikely to cover you for a work-related mishap.

What are the typical employers' liability insurance limits?

Small business owners typically choose employer’s liability limits of $100,00 per accident, $500,000 per policy, and $100,000 per employee. Limit increases can typically be purchased for a small increase in premium.

These liability limits are completely separate from the medical and wage benefits offered by your workers' comp insurance, and this option might not be available in monopolistic states.

How to get employer’s liability insurance

In most states, your employer’s liability insurance is included in the workers’ compensation coverage you purchase from a private company.

In the monopolistic states of North Dakota, Ohio, Washington, and Wyoming, their workers’ compensation laws require employers to buy workers' comp insurance from a state fund. In 10 other states, employers have the option of buying their workers’ comp coverage from a state fund or the private market.

State-operated workers’ comp funds don’t include employer’s liability coverage. If you buy workers’ comp through a state fund you would need to buy a separate employer’s liability policy from an insurance company, to be protected against legal actions by your employees over a workplace injury or illness.

You might buy employer’s liability coverage as a separate policy, known as stop gap coverage, or as an add-on endorsement to your general liability insurance.

If you’re in need of employer’s liability or workers’ compensation insurance, you can buy coverage from Insureon and get your certificate of insurance (COI), typically in less than 24 hours.

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How much does employer’s liability insurance cost?

A small business owner calculating their workers' comp insurance payments

Insureon’s small business customers pay an average of $45 per month or $542 annually for workers’ comp insurance, while 23% pay less than $30 per month and 40% pay between $30 and $60 per month.

Your workers' comp cost is calculated based on a few factors, including:

  • Payroll
  • Location
  • Number of employees
  • Industry and risk factors
  • Coverage limits
  • Claims history

How can I save money on my workers’ comp premium?

There are several options for saving money on workers’ compensation premiums.

If your business has few risks and a small number of employees, you might be eligible for a minimum premium workers' compensation policy. This offers the smallest premium an insurance company will sell a policy for, with the minimum amount of coverage.

Most workers’ comp premiums are based partially on your annual payroll figures. If your number of employees fluctuates throughout the year, you might opt for a pay-as-you-go workers' comp policy. Your monthly premiums would be based on how many employees you have within each month.

If you’re a sole proprietor and exempt from your state’s workers' comp requirements, yet you need proof of workers’ comp insurance to qualify for contracts, a workers’ comp ghost policy would give you that proof of insurance at a minimal cost. Just be aware that a ghost policy only offers proof of insurance, without any real coverage.

What’s the difference between employer’s liability vs. employment practices liability insurance (EPLI)?

Employer’s liability insurance offers financial protection against workers' compensation claims, employee lawsuits, and settlements for work-related injuries and illnesses.

It’s included with the workers’ comp insurance you buy from an insurance carrier or can be purchased separately if you get your workers’ comp coverage from a state fund.

Employment practices liability insurance (EPLI) covers the types of claims and settlements that are related to your employment practices, such as a violation of an employee’s rights or a hostile work environment.

ELPI isn’t included in your workers’ compensation insurance and is typically purchased by business owners and directors to protect themselves from these types of lawsuits.

EPLI coverage includes employee claims of:

  • Wrongful termination
  • Discrimination
  • Sexual harassment
  • Wrongful discipline or demotion
  • Invasion of privacy
  • Breach of an employment contract
  • Mismanagement of benefits
  • Slander or libel
  • Get workers’ compensation insurance quotes for your small business

    Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. carriers on all types of small business insurance. You can also consult with a licensed insurance agent on your business insurance needs. Once you find the right policies for your small business, you can begin coverage in less than 24 hours.

    Updated: May 16, 2024
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