What Does Employer's Liability Insurance Mean?
Employer’s liability insurance refers to an insurance policy that protects employers from suffering major financial losses in the event that a worker sustains a job-related injury or illness that a workers’ compensation policy does not cover.
Insuranceopedia Explains Employer's Liability Insurance
Liability insurance serves to protect the policyholder from various risks of liabilities typically imposed by lawsuits and similar claims. These policies offer protection against third-party insurance claims. This is why insurance companies pay the benefits to someone who is not a party to the insurance contract rather than to the policyholder. The main types of liability insurance include:
- Public Liability Insurance: This provides coverage from a range of business-related processes and activities that have the potential to affect third parties.
- Product Liability Insurance: This provides coverage to companies engaged in the business of manufacturing or supplying products against the potentially harmful effects that those products might have on a consumer.
- Employers Liability Insurance: This provides coverage to employers if their employees sustain injuries during the course of their employment.
- Third Party Liability Insurance: This provides protection from the actions of a third party. For instance, if a third party without insurance hits your vehicle, you can purchase third-party insurance on their behalf.
State governments require employers to purchase workers’ compensation insurance. If an employee becomes ill, suffers an injury or dies because of job-related causes, workers’ compensation insurance provides the benefits of medical expenses and lost wages to employees.
In some situations though, employees could have the opinion that workers’ compensation does not cover their loss effectively. This is especially so if they believe that their employer’s negligence resulted in the injury. In this scenario, they have the option of suing their employer and making punitive claims for pain and suffering.
General liability insurance policies and workers’ compensation insurance policies do not cover these kind of claims. This is why employers need to purchase employers liability insurance. These insurance policies usually place a limit on the amount paid out per employee, per injury and per illness. In addition, these policies do not provide coverage to independent contractors.