Why You Need D&O Coverage

Many companies, particularly those without shareholders, are often under the impression that directors and officers cover is not a necessary part of their liability insurance package. This could be a mistake, though. Any business in which it is possible for individual members of management to be sued personally can benefit from having D&O coverage.

If your directors and officers develop personal relationships with vendors or investors, it is smart to have coverage to protect them in case they are personally sued for the way they conduct business. No matter how small your company is, members of your management team are vulnerable, and your general liability policy doesn’t protect their personal assets if lawsuits are filed against them. A D&O policy does.

In fact, many managers won’t take positions in a company that has a high risk for litigation unless the company provides directors and officers cover. They want to know that their personal assets are covered if a lawsuit is filed against them while they are in service to your company. It is also a good idea to write protections for management into your company by-laws. This communicates support and helps protect them as well. An insurance agent who specializes in management liability insurance can provide expert advice on the type of coverage that best serves your management team.