Fiduciary Liability Insurance pays, on behalf of the insured, the legal liability arising from claims for alleged failure to prudently act within the meaning of the Pension Reform Act of 1974. “Insured” is variously defined as a trust or employee benefit plan, any trustee, officer or employee of the trust or employee benefit plan, employer who is sole sponsor of a plan and any other individual or organization designated as a fiduciary. Group life and medical expense plans, as well as pension and retirement plans, are within the scope of the law.
This coverage is important because no matter if the company manages the fund or has someone else manage the fund, the recipients can allege that the trustee chose the wrong manager of the fund. Further, ERISA makes this exposure Personal liability thus exposing the trustee to significant risk.
Minimum limits are usually $1,000,000 and the premiums vary depending on the assets, numbers of employees, locations of the employees, size of the 401k. An application is required and financials are almost always required.