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Predicting insurance costs for PEO's is difficult because they come in all shapes and sizes and perform varying functions based on their contractual obligations.

Professional employer organizations (PEO’s) have evolved dramatically over the years into a wide array of groups that offer staffing and human resources services to other businesses. While many PEO’s resemble traditional staffing companies, others function like outsourced human resources departments.

In most cases, PEO’s offer some type of human resources services, typically for small businesses that lack the resources to perform some of the tasks in-house. If you operate a PEO, you are likely to offer payroll services, employee benefits services, tax administration services, and other HR functions to your corporate clients.

Why Do I Need PEO Insurance?

The only common characteristics shared by PEO’s are that they are complicated. Most PEO’s ultimately enter into co-employment agreements with their clients. Each party will have certain obligations to employees that they must fulfill, greatly impacting employer/employee relationships and playing a significant role in the types of risk that the PEO takes on.

It is these contract specifics that determine what kind of insurance a PEO needs in order to protect itself and individual employees from employment-related claims.

Most PEO’s also need basic business insurance to protect against some fairly common perils. A variety of commercial insurance policies are available to protect you from the risks you face, including:

  • Slips, falls, and other injuries at your office
  • Fire, smoke, or weather events that cause property damage
  • Lawsuits related to your professional services
  • Cyber breaches

What Does PEO Insurance cover?

Professional employer organizations need a variety of basic commercial insurance policies to cover common risks.

Commercial general liability (CGL) insurance provides broad coverage for lawsuits that may be filed against your business. It helps you pay for direct costs related to a claim (e.g., medical expenses, repairing or replacing damaged property) as well as your legal defense if you are sued.

Commercial property insurance is also essential for a PEO. Whether you own your building or lease your office space, commercial property insurance covers damage to a building and its contents (computers, office equipment and furniture, supplies, fixtures, etc.) if it is damaged by a weather event, fire, theft, vandalism, and other causes of loss. Most business property policies also offer coverage for business interruption, which helps you pay for ongoing expenses if you must temporarily close or relocate due to a covered property loss (e.g., a fire).

Most importantly, PEO’s need to provide certain types of coverage for individual employees. Depending on the contract specifics, the PEO may retain the role of the employer and must take on some or all of those obligations.