Key Takeaways
- General liability insurance protects against costly lawsuits from injuries on your premises or during operations.
- Workers’ compensation insurance ensures injured employees receive medical care and wages while shielding the business from liability.
- Professional liability insurance covers errors and omissions claims related to failures in providing HR/payroll services.
- Property insurance safeguards investments in business property against losses like fire or theft.
- Umbrella insurance provides added liability protection above commercial policies.
- Directors and officers insurance protects leadership from lawsuits related to business decisions and legal obligations.
Introduction
As a professional employer organization (PEO), carrying proper insurance coverage is crucial to managing risks and protecting the business. Several types of insurance are especially important for PEOs to consider to shield against financial losses.
General Liability Insurance
General liability insurance is an important policy for companies in the professional employer organizations industry to manage risks and costs associated with potential lawsuits, claims, and related legal expenses. It provides protections from a variety of liability exposures these businesses may face, including top risks like injuries to clients or customers on business premises, lawsuits regarding workplace incidents like discrimination or wrongful termination, medical expenses for those hurt during business operations, and property damage claims of third parties involved. The average estimated annual premium for companies in this industry is around $5,000 based on data of over 1,000 insurance quotes.
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Based on industry data, the average annual pricing for general liability insurance for businesses in the professional employer organizations industry with NAICS code 561330 is around $5,000. This pricing was derived from analyzing over 1,000 insurance quotes for companies of similar sizes and operations in this industry over the past 5 years. The average employees count per company is around 50. Larger companies may see higher pricing.
Estimated Pricing: $5,000
Workers’ Compensation Insurance
Workers’ compensation insurance provides crucial protection for both employees and employers in the professional employer organizations industry. It ensures injured employees receive medical care and lost wages while also shielding businesses from liability costs associated with workplace injuries. As the references show, workers’ compensation insurance offers key benefits to PEOs such as covering medical expenses and lost wages for injured employees, providing protection from potential lawsuits, complying with state laws, reducing liability risks for client companies, and allowing client companies to achieve savings through pooled group insurance plans.
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Based on industry data, the average workers’ compensation insurance rate for professional employer organizations (NAICS 561330) is around $1.20 per $100 of payroll. This rate is derived from historical loss experience within the industry and factors like employee job duties. For a business with a $5 million annual payroll, their estimated annual workers’ compensation insurance premium would be $60,000 ($5,000,000 * $1.20/100).
Estimated Pricing: $1.20/100 of payroll
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, protects professional employer organizations (PEOs) from financial risks and litigation costs resulting from negligent acts, errors, or omissions related to the professional services they provide. It covers legal defense costs and damages claims that may arise from failures to properly perform professional responsibilities outlined in contracts or comply with regulations. Common risks professional liability insurance helps mitigate for PEOs include mistakes in benefits administration, violations of labor laws, errors in payroll or HR services, and breaches of contract or duty.
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After researching average pricing for professional liability insurance for Professional Employer Organizations (PEOs) with NAICS Code 561330, the estimated annual premium would be between $5,000 to $10,000. This pricing was derived based on typical policy limits of $1,000,000 per occurrence and $3,000,000 annual aggregate. Factors like number of employees, annual revenue/payroll also impact the final pricing. For a mid-sized PEO, the price would likely be around $7,500.
Estimated Pricing: $7,500
Property Insurance
Property insurance provides essential protection for businesses in protecting their investment in property and ensuring stability in operations after a covered loss. It safeguards Professional Employer Organizations from financial risks and reimburses costs to repair or replace damaged assets after events like fires, storms or theft. Key benefits include protection of equipment, furniture and other company property. Coverage also extends to property temporarily off premises and ensures replacement with new items. Common use cases involve fire damage, water damage from plumbing issues, theft of electronics and storm damage. Replacement cost coverage and business interruption insurance allow normal operations to continue following an insured loss. Average estimated pricing is between $0.70 to $1.20 per $100 of insured property value based on industry standards.
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Based on average property insurance pricing for businesses in the professional employer organizations industry, the estimated price would be around $0.70 to $1.20 per $100 of insured property value. This was calculated based on industry-reported averages, factors like business size, property type (e.g. office, warehouse), security features, past claims, and geographical location.
Estimated Pricing: $0.70 to $1.20 per $100
Umbrella Insurance
Umbrella insurance provides additional liability protection for professional employer organizations above and beyond what is covered by primary commercial policies. It offers higher liability limits that kick in after underlying commercial general liability coverage is exhausted. Umbrella policies are especially suitable for PEOs due to the variety of risks involved in co-employing workers for multiple client companies. They help shield against expensive lawsuits by providing liability coverage in excess of primary insurance limits. Standard annual premiums for $1 million in umbrella coverage are approximately $2,500 based on typical rating factors for PEO businesses.
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Based on typical pricing structures for umbrella insurance policies and considering risk factors specific to businesses classified under NAICS code 561330 (Professional Employer Organizations), the estimated average annual premium for a $1 million occurrence/$2 million aggregate umbrella policy would be around $2,500. This estimate was derived based on standard rating factors such as number of employees, annual payroll, and classifications of business operations.
Estimated Pricing: $2,500
Directors And Officers Insurance
Directors and officers (D&O) insurance is an important risk management tool that provides protection for the leaders and organization of professional employer organizations against lawsuits and legal costs arising from business decisions, actions, and legal obligations. As co-employers, professional employer organizations take on various legal responsibilities and potential liabilities from employer-related lawsuits. D&O insurance helps protect the organization and its leaders from financial losses arising due to legal claims related to issues like wrongful termination, discrimination, mergers and acquisitions activity, and investigations by regulatory agencies. Having D&O coverage around $5,000-$10,000 annually demonstrates a commitment to good corporate governance and helps minimize financial risks for the organization.
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Based on research, the average annual pricing for Directors And Officers Insurance for businesses in the Professional Employer Organizations industry (NAICS Code: 561330) is around $5,000 – $10,000 per year. This pricing is derived based on typical policy limits of $1 million – $5 million and deductibles of $10,000 – $25,000. The pricing can vary depending on factors like the size of the company (annual revenue), number of employees, claims history, location, and risk profile.
Estimated Pricing: $5,000 – $10,000
Conclusion
Maintaining comprehensive insurance tailored to the unique needs of professional employer organizations can help protect a business and its clients from costly lawsuits, claims, and disruptions. The referenced types of coverage and their estimated pricing provide a helpful overview for PEO owners to evaluate their risk management program.