When it comes to business, there are a lot of moving parts. From the employees who keep things running smoothly to the board of directors who make strategic decisions, a company is only as strong as its weakest link.
This is why every business needs directors and officer's insurance - also known as D&O insurance.
This type of policy protects individuals from personal financial losses if they are sued for wrongful decisions or actions while in their corporate roles.
In this article (and video below), we break down nine reasons every business needs Directors & Officer's Insurance...
9 Reasons Every Business Needs Directors & Officers' Insurance
D&O insurance is crucial, but its complexity can make it difficult to comprehend fully.
D&O insurance is rarely a “one-size-fits-all” solution, as policies are flexible enough to meet the unique needs of a variety of businesses.
Here are nine reasons why your company needs D&O insurance:
1) Protects Against Personal Liability
The most important reason to have D&O insurance is that it protects individuals from personal financial losses in the event that they are sued for wrongful decisions or actions while in their corporate roles.
Without this coverage, directors and officers would be left footing the bill for any settlements or judgments against them - which could easily bankrupt an individual.
2) Covers Financial Losses
D&O insurance not only protects the individual from personal financial losses but also reimburses the company for any financial losses that it incurs as a result of wrongful decisions or actions by its directors and officers.
This coverage is crucial to help a business bounce back after an expensive lawsuit naming corporate executives and board members as plaintiffs in the lawsuit.
3) Attracts and Retains Top Talent
In today's litigious society, many individuals are hesitant to take on leadership roles within a company unless there is some form of protection against personal liability.
By offering D&O insurance, businesses can attract and retain top talent - even in risky industries.
4) Mitigates Business Risk
No company is immune to the risk of being sued - even if the allegations are completely baseless. Without Directors & Officers Insurance, your corporate executives and board members are personally on the hook for defense costs in the event of a lawsuit.
D&O insurance can help to mitigate this risk by providing a financial safety net in the event of a lawsuit.
5) Saves Time and Money
When a business is hit with a lawsuit, it can be extremely time-consuming and expensive to defend against the claims - even if they are ultimately found to be without merit.
D&O insurance can help to defray the cost of legal fees and other associated expenses so that businesses can focus on what's important: running their operations.
6) Provides Peace of Mind
Perhaps one of the most important benefits of D&O insurance is that it provides peace of mind for directors and officers.
Knowing that they are protected from personal financial ruin in the event of a lawsuit can help individuals to focus on their work and make sound decisions for the company.
7) Not Just for Public Companies
Though D&O insurance is most often associated with public companies, it's important to remember that private companies are just as vulnerable to lawsuits.
In fact, private companies are often sued by employees, shareholders, and other third parties - making D&O insurance an essential piece of any business's risk management strategy.
8) Security in Bankruptcy
No business likes to think about the idea of going into bankruptcy. But in reality, bankruptcy can happen. When it does, creditors can pursue legal action against officers, directors, and board members if they feel that these individuals did not act in their best interest.
D&O insurance provides a layer of protection for your corporate executives and board member in the event of such a claim.
9) Protection from Employee Practice-Related Claims
Employment practice-related claims are on the rise, and in our increasingly litigious society, the cost of employee practice-related claims is increasing rapidly. While some portion of these claims can be covered by Employment Practices Liability Insurance, executives and board members can still be exposed.
Costly lawsuits and settlements involving named executives and board members can be mitigated through director's & officer's insurance.
For all of these reasons, it's clear that D&O insurance is an essential piece of any business's risk management strategy.
When it comes to protecting your business, there is no such thing as being too cautious.
By investing in director's and officer's insurance, you can safeguard your company against various risks - giving you peace of mind and allowing you to focus on what's important: running your business.
The point here is there is a whole package of insurance coverages that you need to at least consider in order to protect the sustainability and profitability of your business, director's & officer's insurance being a big part.
We can help.
If your current insurance professional has never addressed issues like this with you before, then I’d encourage you to reach out to us today.
- You can call or text us at 518.960.6600
- Click here to contact us via email.
I look forward to introducing you to a new way of viewing your insurance program.