What is Directors and Officers Insurance?

What is Directors and Officers Insurance?

Directors and officers insurance is one of the most important type of insurance for a company to have, but it is also one of the least understood. Here’s a quick guide to how this type of insurance works and why it matters.

Who Needs It?

Directors and officers coverage is a type of liability insurance that protects the officers, executives, and directors of a company. If they are sued for damages relating to alleged wrongful acts committed in their position, such as misstatements, omissions, errors, misleading statements, or breaches of duty, the liability insurance helps to provide financial support. Often directors and officers insurance extends to past, present, and future corporate leaders, as well as other employees in some cases.

What Companies Is It for?

This type of coverage should be purchased by any organization with a board of directors. It is usually a good idea for publicly traded corporations, private companies, nonprofit groups, and other organizations to have directors and officers insurance. Many potential investors require coverage as a condition for providing funding to an organization.

Why Is It Important?

Directors and officers liability coverage is important because lawsuits can be initiated against any company and against the leaders of that company. Directors and officers can and are sometimes held responsible for the behavior of their corporation, and most believe that it is better to be insured rather than risk losing personal assets. Directors and officers insurance is an absolute must for just about any company.

 

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