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Directors and Officers Liability Insurance Basics

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What is directors and officers liability insurance?
Directors and officers liability insurance protects past, present and future directors and officers of for-profit or nonprofit companies from damages resulting from alleged or actual wrongful acts they may have committed in their positions. The policy provides protection in the event of any actual or alleged error, misstatement, omission, misleading statement, or breach of duty. In addition, some policies extend the same coverage to employees.

Directors and officers liability insurance is needed when a board of directors is assembled. Investors usually require that you have directors and officers liability insurance as part of the conditions for funding your company.

Who generally purchases directors and officers liability insurance?
Any publicly traded company with a corporate board or advisory committee should consider director and officers liability insurance. Non-profit organizations and private companies could benefit as well from the protection offered by directors and officers liability insurance.

Why buy directors and officers liability insurance?
Claims from employees, clients and stockholders may be made against any company and against the directors and officers of a company. Since a director or officer can sometimes be held responsible for acts of the company, most directors and officers will want to be covered rather than risk their personal assets.

Investors and members of the board of directors will not risk their personal assets to serve as a corporate director or officer without directors and officers insurance coverage.

What does directors and officers liability insurance cover?
Criminal, administrative, civil, and regulatory proceedings based on actual or alleged acts, errors, omissions, misstatements, neglect, or breach of duty committed or allegedly committed by a director or officer are covered with directors and officers liability insurance.

Exclusions
A directors and officers liability insurance policy covers defense expenses and financial damages or settlements. The policy does not cover wages, fines, taxes, penalties, or multiplied damages.

Coverage limits
Coverage limits are available from $500,000 to $1,000,000 per claim and annual total limit, with a $5,000 deductible per claim.

Directors and officers liability insurance vs. professional liability insurance or errors and omissions coverage.
Directors and officers liability insurance is often confused with professional liability insurance or errors and omissions coverage. The two are not the same; professional liability/errors and omissions coverage applies to performance failures and negligence with respect to products and services, not the performance and duties of the executive team (as with directors and officers liability insurance).

Get straightforward advice for your business by speaking with a business insurance agent today.

Call Today For A Free Quote

Call 1-888-705-2379 to speak with a business insurance agent, or request a call and one of our business insurance agents will contact you.
Call Today For A Free Quote1-888-705-2379
Directors and Officers LiabilityRequest a Call
 
Wells Fargo Insurance, Inc. (Minneapolis, MN) is a licensed agency that represents — and is compensated by — the insurer based on the amount of insurance sold.