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Understanding Small Business Insurance

Employer’s Liability Insurance

Employer’s Liability Insurance

In most cases, employer’s liability coverage is part of a workers’ compensation insurance policy. But for employers in monopolistic states who get workers’ compensation coverage through a state fund, employer’s liability insurance isn’t included in their policy.

This broader coverage, known as Part Two, is designed to the protect the business from liabilities due to the death or injury of an employee, family members, and third parties who might pursue legal action. While workers compensation is considered a “no fault” remedy, employer’s liability insurance requires that employees or their families be able to prove negligence to win a claim.

Employers’ Liability Insurance is separate from a business’ commercial or public liability insurance which covers the employer for claims made against the company by third-parties or the general public.

Most states have established a specific limit of liability with basic employer limits of $100,000 per bodily injury occurrence (for both injury and disease), and a $500,000 aggregate limit for bodily injury by disease. So, whereas Worker’s Compensation Insurance coverage limits are mandated by the state, each employer can establish its own limit as long as it meets the minimum requirement.

The premium costs of both parts of employer liability coverage are determined by company using several factors, such as the type of business and the type of activities and work duties in which employees engage.

Different duties and activities are assigned specific employee classifications which are then rated by classification. The size of a company’s payroll and the amount of Employer Liability coverage needed are also a determinant in premium costs.

For companies domiciled in states that allow the purchase of private insurance, it’s always best to shop around as the different carriers will price any one of these factors differently into the total premium.

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