According to insurance industry estimates, fewer than 50% of companies carry Employment Practices Liability Insurance (EPLI). While most large companies carry it, the smaller the employer, the lower the percentage of coverage. This mirrors feedback I get from CEOs I speak to nationwide. Although the cost of coverage varies, a $1 million policy with a $10,000 deductible usually costs from $50 to $250 per year per employee. When you think about obtaining this coverage, weigh the cost of protection against the likelihood and impact of a claim, settlement, or verdict.
Check out the cost figures on claims, derived from the EEOC, Jury Verdict Research and other sources:
Claims and cost figures
- 88,778 cases were filed with the EEOC in 2014
- Average employee verdict exceeds $200,000
- 14% of all verdicts exceed $1 million
- Average settlement is $75,000
- Legal fees average over $100,000
- Wasted time, emotional stress, and brand damage among stakeholders — often unquantifiable costs
That is the potential exposure. What is the potential of getting hit with it? According to industry data, an employer is more likely to face an employment-practices claim than a property or general liability claim. Almost 75% of litigation against corporations involves employment disputes, and more than 40% of employment-practices claims are filed against companies with 15–100 employees.
There are about 6 million companies in the U.S., and roughly 2.5 million have 15 or more employees. Using rough math and industry multipliers for unreported or privately settled claims, dividing 2.5 million employers by roughly 300,000 claims suggests about a one-in-eight chance of experiencing a claim in a single year — meaning a firm can reasonably expect at least one employment-related claim over an eight-year period, depending on size, location, compliance practices, and culture.
By purchasing EPLI (Employment Practices Liability Insurance), you not only cap your out-of-pocket risk at the policy's retention, but you also gain access to insurer expertise in claim management and the freedom to let go of poor performers without the same fear of litigation. For example, a 50-person company paying an average of $120 per employee per year would spend about $7,200 annually; over eight years, built-in premium increases might total roughly $70,000.
Compare that to an average settlement cost of $75,000 plus $25,000 in legal fees for a single claim; insurance can place you ahead financially while also removing much of the stress and distraction. If a case goes to verdict the costs can multiply and potentially threaten cash flow, so you should consider this risk when evaluating coverage options.
The bottom line: not getting this coverage is a gamble that could significantly impact or even wipe out cash flow. If you want to move forward, talk to an agent to review options and limits that fit your business needs: talk to an agent.
Frequently Asked Questions
What does employment-practices insurance typically cover?
It commonly covers claims such as wrongful termination, discrimination, harassment, and retaliation, plus defense costs and settlements up to the policy limit.
How do insurers determine premium cost?
Premiums are based on factors like company size, industry, claims history, workforce composition, and chosen limits and retentions.
Do small businesses need this coverage?
Smaller firms can still face significant employment claims; many insurers report a substantial portion of claims are filed against businesses with 15–100 employees.
What should I ask an insurance professional when shopping?
Ask about covered claims, exclusions, defense control, limits, retentions, and how claims are managed and defended.