D&O Insurance: Directors & Officers Insurance Quotes

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:

• Public Liability Insurance for Business: 101, Cost & Cheap Quotes
  

Directors & Officers Insurance Definition 

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.

Who is Covered?

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

Why is Board Of Directors Insurance Important?

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. 

Common Terms Used In The Language Of Directors And Officers Liability Insurance

Insured Person

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 

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.

Policy Period

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 

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

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. 

Loss

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. 

Extended Reporting Period 

An extended reporting period is an endorsement which extends the coverage of directors and officers liability insurance past its expiration date. 

Exclusion 

Exclusions are costs, perils, and other things not covered by directors and officers liability insurance. 

How is Directors And Officers Liability Insurance Underwritten?

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.

When Does Coverage Kick In?

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:

Employment Related Claims 

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

Shareholders Actions Or Corporate Governance Related Cases

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

External Source (Third Party)

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.

• Customer Or Consumer Group-Related Issues

-Fraudulent or dishonest acts

-Breach of contract

-Breach of fair trading Laws

• Creditor-Related Concerns

-Breach of fiduciary responsibility ensuing in financial -losses or bankruptcy

-Insolvent trading

• Competitor Claims

-Theft of intellectual property

-Pilfering of competitor's customers

-Trade secrets misappropriation

Claims from Government Authorities Such As Local Government, Tax Authorities, Etc.

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.

Required D&O Limits

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.

Directors And Officers Liability Insurance Cost

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. 

How To Compare Directors And Officers Insurance Quotes?

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.