D&O insurance - Why is Directors and Officers liability insurance required?
The Directors and officers liability insurance offers coverage to the leadership when investors, employees, customers or competitors sue them due to any wrongful act or decisions made as per their roles and responsibilities within the organization.
Here are the 3 main reasons why your business should invest in a Directors and Officers liability insurance policy -
Don’t burn a hole in your pocket
A single lawsuit or settlement can cause a huge financial loss for a business. D&O insurance provides coverage for legal fees and damages, hence minimizing the risks.
Send a strong message to the investors
By purchasing a Directors and Officers liability insurance policy, your business reputation is guarded. It sends a strong message to the investors, and stakeholders that risk management is very crucial to your business.
Attract & retain your top-tier employees
A D&O insurance policy provides an additional layer of protection to your leadership. This can make your business look more attractive leading to sourcing and retaining the top 1% of employees.
What is Directors and officers liability insurance?
Directors and Officers liability insurance, commonly known as D&O insurance, covers or insures the directors, officers, and other top-managerial employees against any claims or personal liability.
As mentioned above, if a top-managerial-level employee is sued for any wrongful acts or decisions taken during their period of service, the D&O insurance policy can provide solid coverage against this lawsuit and cover the expenses incurred.
Directors and officers liability insurance - features and benefits
The features and benefits of Directors liability insurance are as follows-
1. The D&O insurance offers coverage for wrongful acts or decisions like
- Workplace discrimination, sexual harassment at the workplace, or other improper workplace etiquettes
- Violation of duty or violation of trust
- Act of negligence or omission
2. With the Directors and Officers liability insurance, all directors, regardless of their designation or age, are covered under a single policy.
3. A D&O insurance policy can be a pre-requisite for investors to fund your business, providing security & reassurance for all parties involved.
Three clauses of Directors and officers liability insurance
Your Directors and Officers liability insurance is governed by three clauses, they are
Please note that this coverage is valid only if the claim/securities claim is reported to the insurer for the first time during the policy period or the applicable discovery period for all 3 clauses.
Directors and officers liability insurance coverage - Inclusions
Your Directors and Officers liability insurance offers extended coverage for the following, according to the terms and conditions of the policy -
- Legal representation costs
- Public Relation expenses
- Protected excess limit to Non-executive directors
- Emergency costs coverage
- Coverage for reputation damage
- Extradition Costs with the Insurer's prior written consent
- Bail bond and civil bond expenses coverage
- Coverage for subsidiaries
- Discovery period coverage for retired executives (who are insured)
- Regulatory crisis response coverage
The following people can be covered under D&O insurance -
- Directors, Officers and their spouses
- Legal heirs
- Company secretaries
- Lawyers and company representatives
Exclusions in the Directors and officers liability insurance
The Directors and Officers liability insurance does not cover the following -
- Coverage is not extended for any acts of fraud, dishonest conduct or criminal act
- No coverage is extended for property damage or bodily injury
- No coverage is extended for fines, punitive damages or penalties
- The coverage will not be provided for any actions before the initiation of the policy.
Why buy Directors and officers liability insurance from Pazcare?
D&O insurance can be tricky, so here is how Pazcare can simplify it for you.
Choose your insurer and offerings
Pazcare provides you with Directors and officers liability quotes from top insurance companies. Hence, you can choose the insurer and extend your coverage.
Dedicated account managers
Have questions or require assistance with your D&O insurance policy? A dedicated account manager from Pazcare will guide you through your questions.
24X7 customer assistance
Pazcare’s customer support team makes sure that you are provided with 24X7 customer service in case of queries, policy assistance or claims.
Who should buy Directors and officers liability insurance?
The Directors and Officers liability insurance can be purchased by the following organizations -
Small and medium-sized enterprises
Small and medium-sized businesses are continuously growing and the growth involves making crucial day-to-day business decisions. These may come with certain disadvantages which can be vulnerable to a lawsuit. Hence, having a D&O insurance policy can cover these expenses.
Publicly traded companies
D&O insurance can be beneficial for companies that are publicly traded, as they are subject to greater regulatory scrutiny and potential legal action from shareholders or investors.
Large organizations with a board of directors
D&O insurance can be particularly important for companies that have a board of directors or officers with decision-making authority, as they may face a higher risk of being sued for alleged wrongful acts or breach of duty.
Any company or organization that has directors or officers should consider purchasing D&O insurance to help protect their key decision-makers from personal financial losses resulting from legal action taken against them in connection with their duties.
With Pazcare, your D&O insurance buying process will be smooth and easy. With dedicated account managers, 24X7 claims support and claims assistance, your insurance experience will be personalized.
Frequently asked questions around Directors and officers liability insurance in India
What does directors and officers liability insurance cover?
Directors and Officers liability insurance provide coverage to directors, officers, and other high-ranking employees against personal liability or claims due to any wrongful act or decisions. This includes Legal representation costs, Public Relations expenses and many more to which the coverage can be extended.
Is Director & officers liability insurance Mandatory for all listed companies?
In India, the Director & officers liability insurance commonly known as D&O insurance is not mandatory. However, as a prudent risk management approach every company can purchase the D&O insurance policy.
What are the exclusions of directors and officers liability?
Here are the most common exclusions under the Director & officers liability insurance -
- Coverage is not extended for acts of fraud, dishonest conduct or criminal act
- Fines, punitive damages or penalties are not covered.
- Property damage or bodily injury are not covered.