Fiduciary insurance is a confusing topic and because of its complexity, purchasing the right coverage often gets set aside until later. This can be financially devastating to a fiduciary – and can affect personal assets as well as the company’s assets.
A fiduciary is defined as any individual or entity who deals with employee benefit plans like savings, profit sharing, health and welfare. More specifically, it’s the officer, administrator or executive who designs and manages such plans.
Failures and subsequent legal actions can arise when there are omissions or errors in plan management, whether internally or from outside sources like investment management groups, accountants, and professional or private financial advisers.
Important and necessary steps were taken to protect retiree savings plans under the Employee Retirement Income Security Act of 1974 (ERISA). Further protection for 401 (k) plans was added later. With these acts, private industries are held to certain standards and guidelines for the administration and taxing of pension and benefit plans.
Many business owners or officers assume that general liability insurance will protect them in fiduciary lawsuits, but this is not the case. ERISA fidelity bonds are required for any entity that manages a retirement plan, but these do not cover personal assets from fiduciaries. Directors and Officers liability coverage policies also do not cover personal assets in fiduciary legal cases.
In Texas, fiduciary liability insurance protects individuals and businesses, particularly in the construction and energy fields. These areas are prone to unexpected disasters and accidents and are laden with risks. Fiduciary liability insurance protects against unforeseen lawsuits.
Fiduciary liability insurance provides special protection for those involved in investment or benefit planning, specifically employee benefit plans, and officers or employers who sponsor such plans. It covers not only pension plans, but life and medical expense plans .
Conflicts and legal action could result from:
Lawsuits can be particularly damaging because not only is the company or organization held responsible, a fiduciary can be held personally responsible for losses and lose personal assets like savings and property.
Even with vast knowledge and experience, fiduciaries can make simple errors and omissions that could lead to lifelong, financially and professionally devastating consequences. Purchasing a low cost fiduciary insurance policy in Texas can help reduce the damage to personal and company assets.