Figuring our when you need fiduciary insurance can help you determine, analyze and examine all your options. Fiduciaries wear many hats and juggle many responsibilities in their role. Professionals in this position deal with managing another person’s property or finances, but many people take on fiduciary duties even if the word is not in their job title. For example, if you’re a business owner who oversees employee benefits, this is a fiduciary duty.
Fiduciary Insurance and Its Impact
Because of the obligations that such a role entails, many liabilities emerge, too. Luckily, fiduciary liability insurance can protect you against these liabilities, but you may still be wondering why you need fiduciary insurance — or, more specifically, when do you need fiduciary insurance?
You Represent Multiple People
The more your business expands, the greater your liability is. It is true of any enterprise, but it’s especially true when fiduciary duties are involved. A fiduciary who only represents a single client may enjoy limited liability, but the opposite is true of a fiduciary representing multiple people. As a small business owner, for example, you may have fiduciary responsibilities to your employees because of your benefits plans.
You Offer Benefit Plans to Employees
Many business owners don’t understand why people refer to them as fiduciary simply because they offer benefit plans to employees. Companies are closely involved in selecting, managing, and administering these plans, though, which means that an error — intentional or not — could cost an employee majorly. An incident like this is considered a fiduciary breach, which is precisely what an insurance policy should protect against.
You’re Subject to ERISA Standards
Another important consideration when determining your liability is whether you’re subject to the standards outlined in the Employment Retirement Income Security Act of 1974 (ERISA). ERISA dictates that any company — or its trustees — that sponsors a benefit plan is personally responsible for any losses that result from a breach of duty. Given that these breaches often occur unintentionally, this illustrates just how important insurance is to protect against liability. If you fit the standards set by ERISA, you should invest in insurance.
You Are an Investment Advisor
Another of the most common roles associated with fiduciary duty is an investment advisor. This job can be an excellent opportunity for anybody with investment savvy, but it also entails significant liabilities as bad advice can become a legal issue. The right insurance coverage can protect investment advisors from the risk of their work. A fiduciary insurance policy for this line of work should also include coverage for any errors and omissions liability.
About Provident Protection
For more than 65 years, Provident Protection Plus has served the businesses and residents across several states nationwide. Today, we are a wholly-owned subsidiary of Provident Bank, the region’s premier banking institution. To learn more about our coverage options, contact our specialists today at (888) 990-0526.