To Our Valued Clients:
One of the most important aspects of your Group Insurance Program is the administration of the plan.
Day to day functions of your Plan Administrator include adding new employees and/or eligible family members to the plan, reporting salary increases to the insurance company, removing terminated employees from the plan, as well as many other important actions and processes.
When it comes to Group Insurance Programs, a simple mistake made by the Plan Administrator can result in a substantial legal liability to the Company.
Some examples are:
Failing to enroll a new employee on the plan… who then suddenly passes away. This can result in the employee’s beneficiary suing the Company for the Life Insurance benefit.
Life Insurance and Long-Term Disability (LTD) amounts based on salary. Please ensure that all employees are informed of the amount of Life Insurance, and Long-Term Disability coverage they are eligible for based on their salary.
Advise your employees in writing of your plan’s overall and non-evidence maximums for Life and LTD, and provide them with related medical evidence (ME) applications.
- If eligible for higher amounts, employees need to complete their ME applications and submit to the insurer for approval. If approved, the employee could be eligible for a higher amount of Life and/or LTD coverage.
- We strongly recommend that you obtain a signed legal waiver to reduce liability for any employee who chooses not to apply for higher amounts of Life and/or LTD coverage that they may be eligible for. Please contact us for help with a waiver.
- If an employee is not informed of the higher amount(s) of coverage they are eligible for based on their earnings, and unfortunately dies or becomes disabled, then any Life and/or LTD claims paid out could be lesser amounts than expected, and the Company could be exposed to legal liability.
New employees should be informed of all benefit coverage offered by their Company plan.
A new Employee who chooses not to join the plan and becomes critically ill could take legal action against the Company for not educating them on the risks of not joining the plan.
- If the employee absolutely refuses to join the plan, and your group does not require 100% participation, then it is strongly advised to have a legal waiver signed to reduce potential liability. Please contact us for help with a waiver.
The Solution? Ensure your Plan Administrator is properly equipped, and be sure to add Plan Administration Liability Insurance
Although having a signed waiver from an employee is recommended, a court will often side with an employee in a lawsuit. For this reason, we recommend adding Plan Administrator Liability Insurance. This coverage can be added as a rider to your business liability insurance (Commercial General Liability insurance) and may in fact already be in place. It provides coverage in the event that an error or omission is made in the administration of the Company’s group benefit plan. In some policies there is no cost to add this valuable coverage.
We recommend that you contact your general insurance company or broker to find out if this coverage is included in your policy and if it is not, we suggest adding it to prevent future risk. If you need help securing this coverage, feel free to contact us and we will provide you with an independent broker who specializes in general insurance.
As always, feel free to contact us with any questions or concerns you may have.
Thank you, Allan Sabat
PS – We will be hosting a webinar on Plan Administration recommended for anyone who is administering your program. Stay tuned.
The Consulting House Inc. | www.consultinghouse.com