Why do business leaders need D&O insurance?
According to Embroker, the main function of D&O insurance is to allow business leaders to make decisions confidently and without fear of personal financial loss.
“D&O claims are not just costly, they can be complicated, stressful, and drag on for years,” the firm added. “This may distract the leadership of your company from running the business effectively if they aren’t covered properly. Given the complexity and costs associated with these claims, any company or organization that has a board of directors, has secured investments, or could be accused of financial mismanagement should strongly consider D&O insurance.”
ITC, meanwhile, explained that while D&O policies are designed to cover for the business-related mistakes of senior management, lawsuits can sometimes arise even if there were no negligent acts committed.
“What’s important to remember is that mistakes happen, and mistakes have consequences,” the center noted. “And even when mistakes haven’t occurred, allegations of mistakes or misconduct have to be defended, which can be very costly. Without a D&O policy or another indemnity mechanism in place, directors and officers would have to pay to defend themselves, settlements, or even fines out of their own pocket.”
Apart from these, D&O insurance can help companies retain strong leaders, according to the III.
“Many potential directors and officers will be reluctant to join your business if they are exposed to personal liability,” the institute explained. “D&O liability insurance helps address this issue.”
It added having this type of coverage can help attract investors as venture capital and private equity firms often require companies to have D&O insurance before making an investment.
Insurance Top Info – ITI 190 about Why business leaders need D&O insurance.