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What is Directors and Officers insurance and how much does a company need?

On Behalf of | Aug 31, 2020 | Firm News

The directors and officers of your company are responsible for its day-to-day business operations and continuing success. 

Directors and Officers Insurance provides them with protection from liability. The amount of coverage varies but the cost is reasonable enough for startups. 

D&O Insurance explained

Defending allegations of wrongdoing against a director or officer of your company could be extremely costly. Directors & Officers or D&O liability insurance can help you cover defense costs in the event of a lawsuit. 

Additional assurances

Top-level officers and those who sit on a company’s board of directors are aware of the risks; potential litigation is always just one misstep away. For example, D&O liability claims concerning regulatory actions are on the rise. Directors and officers argue that corporate indemnification is not enough. They want personal liability coverage, which is where D&O insurance comes in. It not only helps to protect company assets but also the personal assets of directors and officers as well as the assets of their spouses or domestic partners. 

About costs

The amount of coverage a company needs mainly depends on its assets. The average D&O claim in 2016 was for $387,000 but it is not uncommon for claims to run into the millions of dollars. Claimants come from all directions and can include competitors, employees, customers, shareholders and government entities. In that D&O policies might only cost $2,000 per year for $500,000-worth of coverage, a business cannot afford to gamble. Just as a company requires sound legal guidance, it also needs coverage to help thwart any lawsuits aimed at its directors and officers, whose personal assets and integrity are at stake.