Employment Practices Liability Insurance (EPLI): What to Know

Employment practices liability insurance (EPLI) is a type of commercial insurance that protects businesses against employee lawsuits, including claims of wrongful termination, discrimination and harassment. It helps cover legal defense costs, settlements and judgments tied to employment-related claims.

Employment practices liability insurance (EPLI) protects businesses from costly employee lawsuits by covering legal expenses, settlements and claims tied to workplace rights violations.

Businesses with employees should consider EPLI coverage because even unfounded claims can lead to expensive legal proceedings. EPLI insurance can help cover these costs so businesses don’t have to pay out of pocket or disrupt their operations.

Keep reading to learn what EPLI insurance covers, what it doesn’t cover and how to reduce your risk of employee claims.

Key Takeaways

Employment practices liability insurance (EPLI) protects businesses from employee lawsuits alleging violations of workplace rights.
EPLI is valuable for most employers and is especially useful for businesses in high-risk industries and those that employ a high number of workers.
EPLI typically won’t cover employee physical injuries or property damage, professional errors your business makes, employee theft or disputes with independent contractors.
You can purchase EPLI coverage as an endorsement to an existing general liability policy or as a standalone plan.
EPLI could cost as little as $216 as an endorsement or between $1,500 and $2,500 annually for a standard policy, depending on underwriting factors like industry and business size.

What Is Employment Practices Liability Insurance?

Employment practices liability insurance (EPLI) can cover legal defense costs, settlements, and judgments arising from employee claims against your business.^[1] Businesses can purchase EPLI as an endorsement to an existing general liability insurance policy or business owners policy (BOP), or as standalone coverage.^[2]

Without EPLI, the employer would be responsible for paying their own legal fees and any settlements or judgments. For some, the cost of a lawsuit can be extensive and could potentially bankrupt a business without financial reserves.^[1]

	Employment Practices Liability Insurance
What Does it Cover?	Financial losses from lawsuits over accusations of violating an employee’s rights.
What Isn’t Covered?	Employee injuries, employee property damage, wage and overtime disputes, employee theft and more.
Cost	Cost could be as low as $216 per year as an endorsement or between $1,500 and $2,500 annually for a standard policy, depending on various underwriting factors.

What Does Employment Practices Liability Insurance Cover?

Employment practices liability insurance is recommended for any business that has employees. EPLI can pay for costs incurred as a result of:^[1]

Wrongful termination: Former employees can file allegations against their employer, alleging they were unjustly terminated.
Discrimination: This can include claims based on race, gender, age, religion and other protected characteristics.
Harassment: Harassment can take many forms, such as harassment based on sex, disability, age or religious affiliation.
Retaliation: Employees can file claims if they believe they were punished for reporting discrimination or harassment, such as a demotion or a reduction in hours.
Breach of employment contract: Employees may file a claim if their employer failed to uphold a contractual obligation, such as providing computer equipment or issuing a paycheck on time.
Deprivation of career opportunity: Your company is covered if an employee alleges a failure to provide specific types of training that will advance their career.

Coverages Provided Under EPLI

The specifics covered by individual EPLI policies may vary between insurers, so it's essential to review your policy to ensure coverage before you make a claim.

What Isn’t Covered by EPLI?

EPLI coverage is not an all-encompassing form of business insurance, and doesn’t cover you for certain scenarios. Situations typically not covered can include:

Not Covered	What You Need Instead
An employee’s illness or physical injury	Workers’ compensation insurance
Employee theft	A fidelity bond or commercial crime insurance
Professional errors	Professional liability insurance
Fiduciary breaches or corporate governance mismanagement	Directors and officers insurance
Employee disputes over hourly wages or unpaid overtime	Wage and hour insurance coverage (available as an EPLI endorsement)^[3]
Independent contractor or 1099 worker disputes	Independent contractor liability insurance^[4]

Additionally, EPLI policies operate on a claims-made basis, meaning insurers will only reimburse for claims made while the policy is active. If you wait until after your EPLI policy has expired without renewing, insurers will likely deny your claim. Even if the event your claim is about occurred during your policy, waiting until after the policy has expired may also result in your EPLI claim being denied.^[1]

Who Needs Employment Practices Liability Insurance?

Employment practices liability insurance is particularly important for employers in industries with a higher risk of employment-related claims, such as:^[1]

Restaurants
E-commerce
Accountants
Real estate agents
Retail
Business consultants
Commercial and residential cleaning services

Employers with a high number of employees or a history of employment-related claims may want to consider EPLI, as well.

Small and medium-sized businesses that may not have the resources to handle an employment-related lawsuit should also consider employment practices liability insurance coverage, as it can help to cover attorney fees, settlements, judgments and administrative penalties.

EPLI coverage is generally recommended for any employer, regardless of size or industry. This is because any employer can be at risk of employment-related claims, such as wrongful termination, discrimination or harassment. For example, even if your business hasn’t yet hired employees, you could still potentially be sued for denying employment based on a protected class.

Common EPLI Claim Examples

Some common EPLI claims that are typically covered can include:

Failure to hire or promote an employee based on a protected disability, such as someone who’s blind or deaf.
An employee claims they are being discriminated against based on their age by not being included in company decisions or invited to companywide events.
One or more employees assert that a manager or other employee is sexually harassing them.
An employee claims they are having their hours reduced at work for raising concerns about a manager selectively enforcing company policy when it benefits them.

EPLI vs. Other Business Policies

Employment practices liability insurance coverage will protect you from costs defending your business from legal disputes over violating an employee’s rights. Still, it won’t protect you from all forms of unexpected business losses. Other types of business policies to consider alongside EPLI coverage can include:

EPLI vs. General Liability Insurance

EPLI and general liability insurance cover entirely different types of claims — one focuses on employee disputes, while the other addresses third-party injuries and property damage.

	Employment Practices Liability Insurance	General Liability Insurance
Purpose	Covers losses when you’re sued for violating employee rights	Covers physical injury or property damage
Types of Claims	Sexual harassment or refusing to promote an employee based on a disability	Damage to someone’s property or injuries from a slip and fall
Common Industries	Restaurants, real estate agencies, retail stores and accountants	Retail, manufacturing, restaurants, construction and real estate
Covers Violations of Employee Rights	Yes	No
Covers Third-Party Injuries/Damage	No	Yes

EPLI vs. Workers Compensation

EPLI and workers compensation insurance both relate to employees, but they cover very different risks — legal claims versus workplace injuries.

	Employment Practices Liability Insurance	Workers Compensation
Purpose	Covers losses when you’re sued for violating employee rights	Covers employee work-related injuries or illnesses
Types of Claims	Sexual harassment or refusing to promote an employee based on a disability	An employee is injured during work hours and needs medical expenses paid
Common Industries	Restaurants, real estate agencies, retail stores and accountants	Any industry with employees, since workers compensation is required by law in most states^[5]
Covers Violations of Employee Rights	Yes	No
Covers Employee Injuries/Damage	No	Yes

EPLI vs. Professional Liability

EPLI and professional liability insurance protect against lawsuits, but the source of risk differs — employee-related claims versus errors in professional services.

	Employment Practices Liability Insurance	Professional Liability Insurance
Purpose	Covers losses when you’re sued for violating employee rights	Covers financial loss due to an error, omission or professional negligence
Types of Claims	Sexual harassment or refusing to promote an employee based on a disability	Incorrect advice, breach of contract or missed deadlines
Common Industries	Restaurants, real estate agencies, retail stores and accountants	Accountants, architects, business consultants and medical professionals
Covers Violations of Employee Rights	Yes	No
Covers Errors and Omissions	No	Yes

EPLI vs. Directors and Officers Insurance

EPLI and directors and officers (D&O) insurance both deal with legal liability, but they apply to different types of decisions — employment practices versus executive management actions.

	Employment Practices Liability Insurance	Directors and Officers Insurance
Purpose	Covers losses when you’re sued for violating employee rights	Covers losses over alleged mismanagement by a company’s directors and offices
Types of Claims	Sexual harassment or refusing to promote an employee based on a disability	A company director uses company funds for personal use or steals intellectual property to sell to another business
Common Industries	Restaurants, real estate agencies, retail stores and accountants	Finance, non-profits, healthcare, business consultants, manufacturing and technology
Covers Violations of Employee Rights	Yes	No
Covers Mismanagement by a Director or Officer	No	Yes

Is Employment Practices Liability Insurance Required?

Employment practices liability insurance isn’t required by law, meaning you could opt out of this coverage.^[6] However, you may be left paying legal defense costs if an employee or potential employee sues you for a covered scenario, such as failure to hire or promote based on a protected class or sexual harassment between employees.

How Much Does Employment Practices Liability Insurance Cost?

The cost of EPLI can be as low as $216 annually when added as an endorsement to an existing general liability policy or business owners policy.^[1] Standalone policies tend to be more expensive, with average annual costs between $1,500 and $2,500 for a business with five to 20 employees, although they may offer comparatively higher coverage limits. The actual premium will vary depending on several factors, including:^[7]

Number of employees: The more employees a company has, the higher the risk of a claim being made and the higher the insurance cost.
Industry: Companies in certain industries, such as finance, healthcare and retail, may be at higher risk of employment-related claims and may pay more for EPLI.
Claims history: A company with a history of employment-related claims will typically pay more for EPLI than a company without such claims.
Coverage limits: The higher the coverage limits, the more expensive the policy will be.
Deductibles: A higher deductible means you will pay a lower premium, and vice versa.

How To Reduce EPLI Claims Risk

You can help reduce the risk of EPLI claims by treating your employees well, respecting their rights and avoiding unprofessionalism in both your record-keeping and employee management. The following tips can help ensure you stay compliant with good employment practices.

Pay employees fairly. Ensure employees are paid for all hours worked, including overtime. This helps maintain morale and reduces the risk of legal claims.
Keep a comfortable work environment. Be proactive in addressing employee concerns, especially those related to workplace harassment claims.
Create a process for terminating employees. Depending on the type of worker, you should have steps leading up to an employee's termination. This can include a series of disciplinary actions, such as a verbal warning, written write-up and then termination. Employers should also have documentation if they are terminating an employee for performance.
Hire qualified HR professionals. Effective human resources professionals can help develop workplace safety policies and ensure the company complies with federal and state labor laws, reducing instances of employee rights violations.

Employment Practices Liability Insurance at a Glance

Here’s a brief breakdown of everything you need to know about employment practices liability insurance:

Category	Summary
Coverage	Protects businesses when an employee claims that their legal rights have been violated by their employer.
Best for	Companies with many workers or those who may struggle to cover legal expenses if sued for employment practices.
Not covered	You typically won’t be covered for wage disputes, workers’ compensation claims, claims made by independent contractors or instances of employee theft.
Cost factors	EPLI coverage cost will generally factor in your business’s size, industry, claims history, deductible and coverage limits.

How To Get Employment Practices Liability Insurance

You’ll want to compare employment practices liability insurance quotes from at least three to five different commercial insurance companies to find the best possible deal on coverage. Getting quotes will require providing information about your business, such as your industry, location, annual revenue and number of employees. However, you’ll likely need to gather quotes from each insurer one at a time.

Reaching out to insurance companies individually can become tedious, but you can speed up this process by using SmartFinancial. After filling out our online questionnaire, we’ll help you find the commercial insurance policies that meet your business’s needs. Click here to start comparing commercial insurance quotes for free.

Why Wait To Compare and Save? Get Your Free Commercial Insurance Quotes Today!

FAQs

Is employment practices liability insurance required by law?

No, employment practices liability insurance coverage isn’t required by law. However, you may be left with a financial burden without it if you’re sued for violating an employee’s rights.

Can EPLI cover claims from job applicants?

Yes, EPLI can cover claims from job applicants who assert they weren’t hired because of their age, gender, or ethnicity.^[1]

Does EPLI cover harassment claims?

Yes, EPLI will cover your business against harassment claims, including sexual harassment.^[1]

Is EPLI included in a business owners policy (BOP)?

EPLI may be included in a business owners policy (BOP) as an endorsement for an additional premium cost. However, it is generally not automatically included in a BOP.^[2]

What are employment practices?

Employment practices are the policies and procedures a company uses to manage its workforce, such as hiring, training, employee relations, performance evaluation and compensation.^[8]

Sources

NEXT Insurance. “Employment Practices Liability Insurance (EPLI).” Accessed March 23, 2026.
Nationwide. “Employment Practices Liability Insurance (EPLI).” Accessed March 23, 2026.
Insurance Risk Management Institute. “Wage and Hour Insurance Coverage Endorsement.” Accessed March 23, 2026.
The Hartford. “Independent Contractors Liability Insurance.” Accessed March 23, 2026.
U.S. Bureau of Labor Statistics. “Removing workers’ compensation costs from the National Compensation Survey.” Accessed March 23, 2026.
Paycor. “What Is Employment Practices Liability Insurance (EPLI)?” Accessed March 23, 2026.
Business.com. “Employment Practices Liability Insurance: What is EPLI?” Accessed March 23, 2026.
AllVoices. “What is an Employment Practice? Definition and Explanation.” Accessed March 23, 2026.

Employment Practices Liability Insurance (EPLI): Coverage, Cost and Claims Guide

Preston Micalizio

Richard Murphy

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