Business owners are strongly urged to get a sense for D&O Insurance, so as to determine whether it is coverage their business needs. What is D&O Insurance? Directors and Officers Insurance protects a business against the legal risk incurred by day to day business decisions made by managers. A Directors and Officers Insurance policy has three key components: part A, part B, and part C.
Part A of the policy is what often first comes to mind when people ask, what is D&O Insurance? This component of the insurance policy covers the directors and officers themselves from direct personal liability in the case of this type of claim. The insurance will shoulder costs of legal proceedings and financial compensation.
Part B provides protection to the company or corporation to indemnify its directors and officers. One example of such a case would be if shareholders decided to file a claim against the company’s directors and officers.
Part C of the policy is also known as entity coverage. In the case of claims that are filed against both the company as a whole and the directors and officers individually, Part C covers this liability.
As a Whole
Taken together, the three parts of Directors and Officers Insurance provide solid coverage for claims against a company’s directors or officers, or against the company itself as a result of the business decisions of directors and officers. If you are seeking to minimize your company’s legal risk, it is a good idea to discuss D&O coverage options with a quality insurance provider.