In its day-to-day operations, your business can’t only be liable but its directors and officers too. And it might need to pay hefty defense costs, provide indemnification, and incur adverse financial losses.
Directors and officers liability insurance helps your business wrap things up without incurring losses in case its directors and officers face a claim. In this guide, know what directors and officers liability insurance is, how much it costs, the best companies, and more.
Also read:
Also called board of directors insurance, directors and officers insurance is an insurance product that provides a shield when directors and officers face liability over wrongful acts, misconduct and managerial decisions that result in economic or financial losses to third parties. Endorsements can be introduced to the language of D&O coverage so that it also covers HR and employment practices issues.
Directors and officers liability insurance covers the directors and officers of:
Non-profit organizations
For-profit organizations
Privately-held firms
Educational institutions
Also, in terms of which particular individuals are covered, these are the most common insureds in the language of directors and officers liability insurance.
Chief executive officer
Chief operating officer
Chief financial officer
Chief marketing officer
Corporate secretary
Chief information officer
Chief technology officer
Professional liability insurance, though providing coverage for the wrongful acts committed by the employees, doesn’t cover executives. This means that professional liability insurance can’t help if directors and officers face responsibility for a claim.
Directors and officers liability insurance is important because it allows your company to shield its directors and officers against claims. With this insurance, your company can cover indemnification and cover the costs of lawsuits on behalf of its directors and officers.
Also, note that your business might be pulled into the mess that its directors and officers made. Board of directors insurance is important because it sees to it that your business can protect its assets.
Insured person pertains to the individual(s) who are covered by directors and officers liability insurance and receives the benefits provided by the policy. Another term for insured person is name insured.
Defense expenses pertain to the costs a named insured needs to pay in case of a claim using the funds provided by directors and officers liability insurance. This can be further categorized as event study expenses and nominal defendant expenses.
Also called policy duration, policy period pertains to the length of time directors and officers liability insurance provides coverage and can be used by the insured person in the event that a claim is filed.
Claim is the action brought forth by a third party against the insured person named in the language of directors and officers liability insurance. Note that the term can also pertain to one’s request to get the coverage of his or her directors and officers policy.
Wrongful act pertains to any action that results in economic or financial losses committed by the insured against a third party, which triggers the coverage of director and officers liability insurance.
In the language of directors and officers liability insurance, loss pertains to economic or financial setbacks the insured person sustains or causes to another due to the commitment of a wrongful act.
An extended reporting period is an endorsement which extends the coverage of directors and officers liability insurance past its expiration date.
Exclusions are costs, perils, and other things not covered by directors and officers liability insurance.
Directors and officers insurance is underwritten as a claims-made policy. It only provides coverage when you file a claim after a covered peril happens and while the policy’s terms are active.
The coverage provided by directors and officers liability insurance is divided into side A, side B, and side C.
The side A coverage of directors and officers liability insurance allows the named insureds to indemnify the losses of the claimant if the organization where they’re working for can’t provide coverage or can do so but is prevented by a liquidation court. Side A coverage also pays for the defense costs the directors and officers must take care of.
Directors and officers side B coverage reimburses the company when it covers the indemnification that its directors and officers are liable to pay for.
The side C coverage of directors and officers liability insurance protects the company if it’s liable for the actions of directors and officers as an entity.
Directors and officers liability insurance kicks in when third parties or employees file a claim. The following are the common charges or allegations the policy can take care of:
Directors and officers liability insurance provides protection in case directors and officers commit a wrongful conduct that violate the rights of employees:
Defamation
Harassment
Wrongful Dismissal
Constructive Termination
Discrimination
Failure to comply with workplace laws
Lack of corporate governance
You can use directors and officers liability insurance to cover the claims filed by shareholders because the executives of your business committed the following:
Misrepresentation of company assets
Misuse of company funds
Misleading disclosure of financial reports
Breach of director's duties
Negligent management
This usually arises when a company files for bankruptcy. Claimants will try to run after the directors and officers in an attempt to recover debts and investments on the grounds that they have not acted upon their best capacity as officials.
-Fraudulent or dishonest acts
-Breach of contract
-Breach of fair trading Laws
-Breach of fiduciary responsibility ensuing in financial -losses or bankruptcy
-Insolvent trading
-Theft of intellectual property
-Pilfering of competitor's customers
-Trade secrets misappropriation
Organizations are separate legal entities. They are covered with laws and may unknowingly breach regulations that govern them, such as corporate law, environmental law, securities law for publicly listed companies, taxation law, and occupational health & safety. Furthermore, corporate governance evolves as the company grows, which increases exposure to claims.
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The required D&O coverage limits of businesses vary and depend on the following factors:
Financial Background
Industry
Revenue
Shareholders
Requirements
Others
There is no rule of thumb since appropriate limits will differ depending on the combination of factors we've outlined above. Below is an illustration of how possible D&O limits could be planned, as explained by FounderShield.
The average directors and officers liability insurance cost is $113 per month or $1,356 per year for a $1 million coverage. Factors that affect D&O insurance rates are:
Number of directors and officers in your company
You company’s valuation
Expected losses
Expected worth of liabilities
Years in business
Claims history
In addition, here’s a table showing the best companies that offer directors and officers liability insurance with their respective d&o insurance cost.
Cost per Month | Cost per Year | Best for | |
---|---|---|---|
CoverWallet | $103.91 | $1,246.92 | Directors and officers liability insurance quotes comparison online |
Tivly | $105 | $1,260 | Comparing directors and officers liability insurance quotes over the phone |
Thimble | $105 | $1,260 | Directors and officers liability insurance for growing startups |
Hiscox | $110 | $1,320 | Directors and officers insurance with fast claims process |
Each organization is uniquely designed. Each has different needs and funding requirements, so when getting a directors and officers insurance policy, always consider the cost, coverage, and insurance company abilities and dependability.
Understandably, directors and officers insurance cost always matter. However, any savings made from reduced premiums may affect the coverage and defeat its purpose of protection. Thus it is not advisable if only the premium is considered.
Furthermore, it is a must that the directors and officers insurance companies tapped can keep their promise stipulated in the acquired D&O policy.
They must have professionals who understand the nuances of business and can give a D&O coverage quote that will satisfy various kinds of business owners' needs.
Here are some questions to ask when you compare directors and officers quotes, before selecting a directors and officers insurance company:
Knowledge: How much do they know about d&o insurance? How well do they understand the business and its industry? An advisor who has a meager understanding of your business will likely not carry the correct insurance, leaving you with inadequate coverage.
Reviews and feedback: Who are their former and current clients? How was their experience with them?
Cost and budget: How much coverage do you and your company need, and how much can you afford?
Coverage: What are the specific risks in your industry? Will their products guard the entire company against lawsuit fees?
Added considerations: Are there any particular deliberations when selecting a policy?
Hence, compare D&O insurance quotes online through this page and choose the best companies that have the right product and coverage for your business. Click the “Get Quotes” button to start.
Get all the best quotes from leading providers in a click of a button!
Many companies offer D&O liability insurance. However, we’ve narrowed the choices to the carriers listed here. That said, read some of the reviews to know their pros, cons, and rate for a $1 million D&O liability insurance coverage.
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Compare directors and officers liability insurance quotes online
Sells directors and officers liability insurance to a wide range of businesses
Directors and officers liability insurance is underwritten by partners
CoverWallet sells directors and officers liability insurance for established businesses in the sectors of management consulting, transportation, food, hospitality, and more. Note that your directors and officers liability insurance from this company is underwritten by several partners.
Before getting covered, CoverWallet requests you to use its online quotes comparison platform to see the rates and buy the quotes of its partners. Directors and officers insurance from CoverWallet offers a $1 million-$2 million minimum per occurrence limit.
Best for: Directors and officers liability insurance quotes comparison online
Average cost: $103.91 per month
Our rating: 10/10
Compare directors and officers insurance quotes over the phone
Call a representative and get covered fast
Responsive customer service
Directors and officers liability insurance is available at Thimble
Doesn’t issue online quotes
Tivly (formerly CommercialInsurance.NET) underwrites directors and officers liability insurance, and sells it in partnership with Thimble. This company’s D&O insurance has a $1 million minimum per occurrence limit. You can request to get more coverage.
Note that Tivly doesn’t issue online quotes. You have to apply for a quote online and wait for an agent to call.
You can also contact the company yourself for fast coverage. That said, Call Tivly now and compare directors and officers liability insurance quotes over the phone.
Best for: Directors and officers liability insurance for growing startups
Average cost: $105 per month
Our rating: 10/10
ACORD 25 certificate of insurance
Same day coverage
Offers directors and officers liability insurance for startup businesses with impressive valuations
You can’t contact customer service by calling
Thimble doesn’t underwrite directors and officers liability insurance. However, it sells one underwritten by Tivly. To get covered, visit Thimble’s website then it will take you to Tivly's representatives.
Best for: Directors and officers liability insurance for growing startups
Average cost: $105 per month
Our rating: 9/10
Efficient claims handling
File and track a claim online
14-day money-back guarantee
Directors and officers liability insurance is underwritten by a partner
Hiscox sells directors and officers liability insurance that CyberPolicy underwrites. To get a quote, you need to visit Hiscox’s page. You will then be redirected to CyberPolicy’s site where you can get an estimate of your rates. If CyberPolicy can’t issue an online quote, it will assign a representative who will discuss the particulars of your D&O policy.
Best for: Directors and officers insurance with fast claims process
Average cost: $110 per month
Our rating: 9/10
Directors and officers liability insurance isn’t the only protection you need. Consider getting these other business insurance policies.
General liability insurance provides protection if your company is liable for the injuries or damaged property of a third party.
Particularly, this insurance will pay the settlements or legal defense costs such as attorney fees, court fees, investigation fees, and others.
Similar to directors and officers liability insurance, general liability insurance is multi-faceted. And aside from bodily injury or property damage claims, it will also help if your company is sued for advertising injury, products and completed operations, or liability to rented premises.
If directors and officers liability insurance protects the leaders of your company, professional liability insurance covers regular employees.
The coverage of professional liability insurance kicks in when the employees of your business or your business itself is liable for:
Negligence
Misrepresentation
False advice
Breach of contract
Breach of confidentiality
Similar to directors and officers liability insurance, professional liability insurance is also written as a claims-made policy. But note that some insurance companies offer this as an occurrence policy.
Workers compensation insurance covers your company’s regular employees. However, you can modify the policy and have directors and officers as named insureds on its terms. With workers compensation insurance, you can cover the following costs when the directors and officers of your company sustain a work-related injury or disease:
Hospitalization
Retraining
Medication
Rehabilitation
Death benefits
Lost wages
Directors and officers liability insurance might not cover negligence claims filed by an employee who sustained a work-related injury or disease. Because of this, insurance companies offer employer’s liability insurance.
If an employee of your business becomes sick or injured then files a claim, employee liability insurance will cover settlements or defense costs such as attorney fees, investigation fees, court fees, etc.
Directors and officers liability insurance covers employment related claims. However, it only does so in a very limited manner. And so, consider getting employment practices liability insurance. Employment practices liability insurance provides comprehensive coverage in case an employee files a claim against your business due to:
Missed employment benefits
Wrongful termination
Discrimination
Sexual harassment
Missed employment benefits
Exploitation
- https://en.wikipedia.org/wiki/Directors_and_officers_liability_insurance
- https://www.iii.org/article/directors-and-officers-insurance
This place is an absolute joke of a company and should be ashamed of the way they conduct business. I was hurt on the job at the end of July and it took them just shy of 7 weeks to issue out a paycheck to me. Yes the amount was back dated but still. Not many have the luxury of not receiving a paycheck for almost 2 months. To top it all off, the original adjuster marked me down for the wrong state which caused a problem from the get go, I've had 3 different adjusters now since each one can't seem to figure out the simplicity of my claim. All my paperwork which includes, my job, house, and drs visits all are from the same state and city but yet some how I have been filed under a completely different state 1500 miles away. They do not answer your phone calls or emails no matter how many you leave. I've had to escalate my frustrations to the supervisors of each of these individuals in order to even get some kind of response. I've had more communication and information given to me about my claim from the customer service representatives then the actual adjusters.......... please tell me how that works?! A serious overhaul needs to happen here in order to serve your clients the way they deserve to be taken care of. 10/10 do not recommend this company to a single soul on earth
I have never had the displeasure of working with a more incompetent and disrespectful person in my life. I’m an injured worker and the adjuster that was assigned to my case was named Carrie Furgeson. In the past 6 weeks that I’ve been injured and out of work I have only been able to get ahold of her twice, not for lack of trying. I have left countless voicemails, countless emails, and she ignores them all. When I am finally able to get ahold of her I’m greeted with terrible customer service. She is rude, she talks over me and I’m hardly able to get a word in edgewise. She spelled my name wrong on my documents even after I spelled it for her properly countless times, this caused a whole new issue with my bank. I have bill collectors from the hospital calling me demanding payment and Carrie Furgeson won’t do a single thing to help, or to get them paid. All of my documentation is in Colorado, my job is in Colorado, my address is in Colorado, all my Dr offices and appointments have been in Colorado and Carrie still managed to hold my claim because she wasn’t sure what state she needed to file it under. It’s been 6 weeks since my Injury and my company still hasn’t received the wage paperwork to fill out so they can get me my correct wages. When she’s not ignoring me she’s answering my questions with “I don’t know” well I don’t know how she got this job, because apparently she doesn’t know anything about it. She is a disgusting morose individual inside and out and I genuinely wish her the worst in all of her future endeavors. I highly recommend you don’t use this company. Please if you are a business owner and your looking into this company please don’t use them. I’m sure they have the cheapest payment and that’s why companies use them in the first place, but you will be doing your employees a grave disservice by forcing them to venture into this absolute dumpster fire of a company. I would rate 0/5 if possible but 1 was the lowest I was allowed.
Their general liability insurance purchase process is simply the best online experience I've ever had in my life!
As long as they cover your line of business, you're literally covered! best rates, best coverage, best online experience, best professionals, can't be happier that I chose them!
It really can't get any better than this... wow