Fiduciary Liability Insurance covers claims resulting from errors in managing employee benefit plans. This includes health insurance, retirement plans, and pensions.
Fiduciary Liability Insurance
What Is Fiduciary Liability Insurance?
Fiduciary Liability Insurance protects businesses and individuals who manage employee benefit plans — such as 401(k)s, pensions, and health insurance — against claims of mismanagement, errors, or breach of fiduciary duties under ERISA (Employee Retirement Income Security Act). It covers legal defense costs, settlements, and penalties if a plan participant alleges financial harm due to how the plan was administered or invested.
Who Needs Fiduciary Liability Insurance?
ERISA holds plan fiduciaries personally liable for losses caused by errors, mismanagement, or failure to act in the best interest of beneficiaries. Even well-meaning HR professionals or executives can be targeted if benefits were mishandled or poorly explained. Fiduciary coverage is critical to protect your business and your leadership from exposure — especially as lawsuits around 401(k) fees and plan performance rise.
Common industries that often require Fiduciary Liability Insurance include:
- Any company offering a 401(k), pension, or health plan
- HR leaders, CFOs, or executives overseeing benefit plans
- Plan sponsors, trustees, or administrators
- Companies undergoing M&A or restructuring (risk of plan transfer issues)
What Does Fiduciary Liability Insurance Cover?
Fiduciary Liability Insurance typically covers:
- Breach of fiduciary duty
- Improper advice or disclosure
- Errors in plan administration
- Wrongful denial of benefits
- Conflicts of interest
- Failure to diversify investments
- Defense costs and penalties from ERISA claims
What Doesn’t Fiduciary Liability Insurance Cover?
While Fiduciary Liability Insurance offers broad protection, it doesn’t cover:
- Intentional fraud or criminal misconduct
- Claims unrelated to benefit plan administration
- Employee dishonesty (covered under Crime)
- Bodily injury or property damage
- Investment losses not related to fiduciary breach
How Much Does Fiduciary Liability Insurance Cost?
The cost of Fiduciary Liability Insurance varies based on factors like business size, industry, location, and claims history.
Key Cost Factors:
- Business size and number of employees
- Location of the business
- Size of benefit plans and number of participants
- Investment strategy complexity
- Plan administration (in-house vs. outsourced)
- Claims history
- Industry risk profile
Typical Cost Range:
- Small plans: $500–$2,000/year
- Mid-sized plans: $2,000–$10,000/year
- Large plans: $15,000–$100,000+/year
Risk Management Tips
To minimize potential claims:
- Hire experienced plan administrators or advisors
- Monitor fees and performance regularly
- Communicate clearly with participants
- Maintain written procedures for plan oversight
- Regularly review fiduciary duty compliance
Talk to An Expert
Our dedicated experts are ready to provide tailored insurance solutions to clients across a wide range of industries and specialized services.
Schedule a consultation to see how Alliance Risk can reduce your insurance risk.
– We look forward to partnering with you.