Directors & officers (D&O) insurance
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What is D&O insurance and who needs it?
Because senior leaders in your company make crucial choices that have an impact on your organization and employees, they face exposure to liabilities that can put them, their families, and their assets at risk if not properly safeguarded. D&O insurance protects individuals or the company. It covers legal fees, settlements, and other related expenses in the event of a lawsuit related to the decisions made while performing duties.
D&O is not only for large publicly held companies, but also for private companies and nonprofits too. You should have D&O insurance if you are at risk for accusations of financial mismanagement, including misuse of funds, misrepresentation of assets, misreporting of performance, or breach of fiduciary duty. A standard D&O policy protects individuals and the company through three coverage agreements: Side A, B, and C.
- Side A protects directors, officers, and their assets in the event that their company cannot or will not fund indemnification.
- Side B reimburses companies for legal fees should they choose to indemnify their directors and officers.
- Side C extends coverage to the company itself and is sometimes referred to as “entity coverage.”
Why do you need D&O insurance?
Here are a few reasons why you might need D&O insurance:
Boosts confidence knowing your company is protected if accusations arise.
Protects directors and officers from personal losses resulting from allegations and lawsuits.
Empowers leaders to perform their jobs without fear of excessive litigation.
Helps attract and retain top talent.
For example, just like when you order a meal at a fastfood restaurant, when you buy the meal deal, it's cheaper than if you buy your sandwich, drink, and fries individually.
Simplifies the insurance process and makes it easier for you to manage multiple coverages in one business owner’s policy.
It’s invaluable to have the peace of mind that you are properly protected through a range of coverages included in one business owner’s policy so you can focus on growing your business.
What risks does D&O insurance cover?
D&O insurance covers a wide range of risks your business may face.
Here are just a few examples:
The founder of a nonprofit organization could be accused of misappropriation of funds.
A company might be sued by shareholders for misrepresentation of assets.
An executive leader in your organization could settle out of court for accusations of fraud.
If cyber criminals hack a medical outpatient facility (ex., a dentist office) and confidential patient information is compromised, the business owner would be liable.
If a clothing boutique stores its employees’ social security numbers in the cloud and that data is compromised, the store owner is at risk of legal action by the employees.
If a logistics company is victim to ransomware after an employee unknowingly downloads a suspicious attachment, the financial burden can be heavy without cyber insurance.
What is the cost of D&O insurance?
The average annual cost of a D&O policy can start at around $1,200 for a small business, but coverage costs will vary. Here are a few factors that can influence the price of a D&O policy for your business:
What other coverage might a business need?
Though D&O insurance covers some of today's most common business risks, it is very specialized. Most businesses require more than that to protect themselves. Here are just a few other common examples of risks and coverages and why you may need them to protect your business:
Business owner’s policy insurance (BOP)
Business owner’s policy insurance provides comprehensive coverage by bundling multiple types of business insurance into a single policy. BOP insurance usually consists of general liability, commercial property, and business income interruption insurance. Bundling with a BOP policy saves you money versus purchasing stand-alone policies.
Commercial auto
A commercial auto policy covers vehicles used for business purposes, including cars, trucks, vans, and other vehicles owned or leased by your business.
General liability insurance (GL)
Covers a wide range of risks and can shield you from financial losses and legal expenses from customer injuries or damage to their property.
Cyber insurance
A cyber insurance policy protects you against the consequences of a cyber incident, such as data breaches, network security failures, cyber extortion (ransomware, for instance), and other cyber attacks.
Workers’ compensation (WC)
Workers’ compensation insurance protects employers and employees, covering financial needs in case of any workplace illness or injury. This insurance is required by law in most states.
Professional liability insurance
Protects professional service providers when their advice or actions could have significant financial or health-related consequences.
How to get D&O insurance or other coverage
By now you understand how important it is to be properly covered through a business policy that includes D&O insurance. What’s next?
Call (380) 225-5242 to connect with an experienced insurance agent who understands the nuances of your business and industry.