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Home > Blog > Why D&O Policies Equal Personal Protection
FRIDAY, AUGUST 23, 2019

Why D&O Policies Equal Personal Protection

ExecutivesAs a business owner, you have to take personal responsibility for a lot of the conduct of your business. However, when the business performs poorly, or makes mistake, you could come under fire. You’ll want your business insurance to be able to help you out, but you have to have your coverage specified to protect you in addition to the business itself. This is why most business principals carry directors & officers (D&O) insurance. How does this policy work in your favor if you pull the strings of your business?

D&O insurance often is thought of as a type of business insurance; that’s what it is, after all. But, in many ways, it is also personal. It can work in business owners’ favor in some types of very challenging situations impacting their operation.

How D&O Insurance Works

In every business, there are those who make decisions. The business owner, high-level managers, corporate boards and the respective members might each be responsible for the actions and choices that affect the business’s performance. If mistakes or problems occur as a result of their decisions, then those affected could hold them responsible.

Under circumstances like these, the business might be able to turn to its D&O insurance. It can help the business respond to allegations that misconduct by its leaders led to harm to third parties. For example, claims that might qualify for coverage under this policy are lawsuits resulting from the company’s stock earnings, or claims that the company misrepresented its assets to shareholders.

The essential benefit of this coverage is that it can help the business cover the legal costs and settlement costs arising from these events. However, because it enables the business to protect itself, D&O insurance also extends thorough protection to the directors themselves.

Why It’s Beneficial to Small Business Owners

If you are a small business owner, then you might need this coverage. Because of the responsibility you have for the direction of the business, you therefore could stand to lose a lot in case a qualifying D&O claim arises. Frequently, such allegations target both the business and the business owner. However, D&O policies exist to protect your personal security in these cases.

First, these policies can pay you if you face losses as a result of D&O lawsuits or claims. The coverage can therefore make sure you never place your personal assets on the line in case of these losses. Furthermore, if you have to use business assets to protect yourself, this coverage can also protect the business itself. Therefore, you won’t have to spend exceptional amounts of profit or income trying to protect yourself and the business from losses.

Posted 7:34 PM

Tags: directors and officers insurance, insurance, business owners, commercial insurance,
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