What is Directors’ and Officers’ Insurance?

27th July, 2018

Firstly, what is Directors’ and Officers’ Insurance? Essentially, this type of insurance provides cover for board members, directors and executives should they personally be accused of wrongdoing or negligence, covering the cost of defence and compensation.

Claims can come from investors, employees, customers, competitors, members of the public and regulatory boards. Typical claims that this insurance covers includes: misuse of company funds, misrepresentation of company assets, fraud, failure to comply with workplace and regulatory laws, breach of duty, breach of confidence and much more.

It is not uncommon for many to think that Directors’ and Officers’ Insurance is for large corporate businesses worth thousands and millions of pounds. This is because they have more monetary value, a large turnover and access to more resources.

However, as the director of an SME or a start-up business, can you not be held personally accountable for something going wrong? Yes, you can. So, do you really need D & O Insurance? Yes. And here’s why:

1. Perhaps your new business cannot financially support such a claim. Maintaining a cash flow can be difficult at the best of times, especially if you are just starting out, let alone when you are left with hefty legal bills.

2. Legal fees can be expensive, usually costing thousands of pounds perhaps even out of your own pocket. This can be particularly difficult if you put all of your money into starting the business.

3. Directors and executives are an easy target in smaller companies as they are easier to get to. Larger corporations have the money, legal teams and the resources to see through a claim that can potentially devastate a start-up company.

4. Just because you have taken out Public Liability and Employers’ Liability Insurance if you have employees, it does not mean you are personally covered for your actions within the business.

5. You can still be held accountable for your actions even when you are no longer a director of a company or the company no longer exists.

You’ve now decided to get Directors’ and Officers’ Insurance, but where do you get it from? Typically, we don’t suggest buying this type of insurance online as it will be a standard ‘off the shelf’ product and will not necessarily meets the needs of your business. An insurance broker, however, can ensure your insurance is tailored to your role as a director and can ensure any questions are answered.

To find out more about Directors’ and Officers’ Insurance, please click here. Or contact a member of the team here to discuss your requirements.