D&O Insurance

D&O insurance protects directors and officers from personal losses resulting from legal action against them for alleged wrongful acts in their managerial capacity. It also covers legal fees and other costs, extending to defense costs arising from criminal and regulatory investigations or trials. Intentional illegal acts are usually not covered. Overall, D&O insurance is a vital form of protection for individuals serving as directors or officers of businesses or organizations.

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What is Directors & Officers Insurance?

Directors and officers insurance offers coverage for unexpected liabilities arising against the managers for any decision or action taken by them as a part of their duties. Organisations usually purchase D&O insurance policies to protect their directors and officers from expensive lawsuits. 

Also, if the organisation does not have this insurance then it is highly unlikely for them to attract managerial-level talent because the risk involved is high.

If the organization cannot financially cover its employees, directors and officers then this policy steps in to save the day by paying those costs and protecting the person’s personal assets. 

However, if the company can indemnify the cost then D&O Insurance will reimburse the paid amount.

Why are Directors and Officers Insurance Required?

Here are a few reasons, why D&O Insurance is required in an organisation:

  • In case of employment practice violations such as sexual harassment, discrimination allegations, regulatory investigations, accounting irregularities, and corporate governance requirement
  • Any kind of exposure that might rise up during mergers and acquisitions
  • Compliance with several legal statutes
  • Helps with vulnerabilities to stakeholders/shareholder's claims

Features & Benefits of D&O Insurance Policy

Here are some of the features and benefits of Directors and officers insurance:

  • Directors insurance provides blanket cover on an unnamed basis and coverage for all ages of directors irrespective of designation, including retired, present and future directors.
  • The plan offers security in case of any alleged or actual error, omission, misstatement, breach of duty, or misleading statement.
  • Generally, investors consider d&o coverage as a prerequisite for providing funds to a company.

Types of Directors & Officers Insurance

There are two primary clauses under D&O insurance with the option of selecting a third clause:

Cover Description Who is Insured? What is at risk?
Side A Insurer pays on behalf of directors & officers for any claim made directly against them when a company cannot pay for it or is not allowed legally. There is no deductible and retention in Side A cover, however, the personal assets are covered. Individual Directors, officer or manager Personal Assets
Side B Company pays on behalf of directors and officers and then gets reimbursement for the amount paid in indemnifying the directors and officer from claims made against them. Company Corporate Assets
Side C Insurer cover the entity for securities litigation claims. Insured can raise a claim against the company itself for a wrongful act in connection with the trading of its securities. Company Corporate Assets

D&O Coverage

D&O liability insurance provides coverage for the following:

  • Right to defend coverage is provided under the d&o policy
  • Coverage for subsidiaries is provided, outside directorship, retired directors, assets, and liberty costs such as bail bond, prosecution, civil bond expenses, heirs, legal and estates representatives, Emergency expenses, Kidnap response, Defense cost, Severability and pollution-associated claims for defense expenses and shareholder claims, etc under d&o policy
  • Employment practice liability cover
  • Cover for negligence/ failure to monitor any claims related to professional indemnity
  • Regulatory crisis response coverage is provided under the board of directors insurance
  • Damage to reputation cover
  • Bilateral discovery period cover
  • Special excess security for non-executive directors

What does D&O Insurance Not Cover?

The D&O policy does not provide coverage for the following:

  • Directors and officers insurance does not provide coverage for any kind of fraudulent activity.
  • The policy does not provide coverage for any kind of intentional non-compliant activity.
  • No coverage for any personal profit or illegal remuneration under directors insurance.
  • A D&O policy will not provide coverage if the action has been taken before the initiation of the policy
  • Any kind of property damage or bodily injury
  • Fines and penalties

Who can Get Covered Under D&O Liability Insurance

Here is a list of people who can get covered under D&O insurance:

  • Company Secretaries
  • Legal heirs
  • Directors
  • Employed lawyers
  • Estate representatives
  • Officers
  • Spouses

Who can Take Action Against Directors and Officers?

Here is a list of people who can take action against Directors and officers:

  • Employees
  • Competitors
  • Suppliers
  • Regulators
  • Shareholders
  • Customers
  • Other stakeholders

D&O Insurance for Small & Medium Sized Companies in India

In today's fast-paced and ever-changing business landscape, managers are often required to make critical decisions on the spot. However, this fast-paced environment can make small business owners and managers vulnerable to legal action from a wide range of parties, including regulators, shareholders, customers, competitors, employees, and government bodies. 

As these legal actions can have a severe impact on the personal net worth of the owners, who are often closely tied to the financial health of the company, it's important to mitigate this risk.

Cost of D&O Insurance Policy

The price of D&O insurance can fluctuate significantly, depending on a variety of factors such as company size, industry, financial position, risk tolerance, claims history, and revenue. Typically, businesses with a longer operating history tend to pay less than younger organizations, all else being equal.

What Type of D&O Insurance Should I Purchase?

Choosing the right type of D&O insurance for your company depends on various factors such as your company's specific needs and budget. It's essential to consider a few main factors, such as whether the policy should only cover managers (Side A) or the company as a whole (Side B and Side C). 

Another key consideration is determining how much coverage is adequate for your company. Additionally, it's important to assess the most significant D&O risks that your company faces, as these may differ depending on the nature of your business.

Six Steps to Structure D and O Insurance Program

  • Benefit from degressive pricing of insurance, where larger towers offer better value for premium money.
  • Consider specialized protection for individuals that cannot be affected by entity coverage and still works if the entity cannot indemnify. 
  • Diversify your insurance program by selecting a tower with many carriers with small limits for increased stability.
  • Ensure that your insurance program is international for cohesive global coverage.
  • Confirm that the primary carrier's claims department has successfully settled large claims and understands their claims protocol.
  • Avoid overloading policies with too many "extras" and ensure sufficient limits are available for the main risks.

How Directors and Officers Liability Insurance Gets Triggered?

D&O insurance in real life is pretty simple. It all begins when a manager allegedly fails to perform their duty. Some of the common scenarios include reporting errors, insolvency, employment malpractice, regulation violation, etc. and as a result, several claimants end up suing the manager and that's when the D&O insurance policy gets triggered.

How to Raise a Claim under D&O Liability Insurance?

Follow the below-mentioned steps to raise a claim under directors liability insurance:

  • Inform Insurer: Inform your insurer as soon as any legal complaint has been filed.
  • Keep Documents Ready: When you will raise a claim the insurer will ask you to submit a set of documents along with the claim form so keep them handy.
  • Fill-in Form: Ask your insurer to give you the claim form to fill up and submit as quickly as possible.
  • Inspection: The insurer will send a team of inspectors to check if the reason behind raising a claim is valid and within the range of coverage provided by the insurance company or not.
  • Compensation: Once the inspector gives a green signal, the insurer will provide compensation as specified in the policy.

How to Renew D&O Liability Insurance?

To renew your Directors and Officers liability insurance coverage, follow the below-mentioned steps.

  • Step 1: Go to the Policybazaar Insurance Brokers Private Limited official website.
  • Step 2: Fill in your policy number to get into your account
  • Step 3: You can add or remove any add-on if you want as you can do it only either at the time of purchasing the policy or while renewing it
  • Step 4: The premium amount of your updated insurance plan will be shown as per your addition or removal of any add-on
  • Step 5: Click on the “Renew” button
  • Step 6: Make the payment using your debit/credit card, UPI or net banking
  • Step 7: Once the payment is done, the insurance company will send the updated insurance policy’s soft copy to the registered email. Apart from this, a hard copy of the policy is also sent to the registered home address in a few days

*To avoid the cancellation of the policy, make sure to renew your directors liability insurance on time.

D&O Liability Insurance- FAQs

  • Q: What are the conditions/situations covered by directors and officers liability insurance policies?

    Ans: Here are some of the scenarios under which Directors liability insurance can come in handy:
    • In case an organization incurs any loss due to wrong actions or decisions taken by the directors and officers in fulfilling their duties according to the memorandum and articles of association.
    • Any legal expense resulting from the prosecution of any director or officer for any examination, inquiry, investigation, or proceedings by the concerned authority.
    • Any expenses incurred by the shareholder of a corporation for pursuing a claim accusing any director or officer and organization is lawfully obliged to pay as per the ruling of a court.
    • It provides indemnity to the legal heirs/legal representatives of the director or officer in case the director or officer becomes insolvent.
    • In case of sexual harassment, discrimination allegations, and other employment practice violations.
    • Exposures related to mergers and acquisitions.
    • In case of incautious investment choices.
  • Q: Do small businesses need D&O insurance?

    Ans: If the company employs someone at a managerial level and his/her decision can affect anyone that could attract a lawsuit then even a small business should purchase a D&O insurance policy.
  • Q: To whom does the cover apply?

    Ans: The cover is applicable to former, present and future members of the board of directors, top management or any employee performing a supervisory role.
  • Q: Can a board of directors member be sued?

    Ans: Yes, any stakeholder like employees, customers, shareholders, the government of regulatory bodies or competitors can sue a particular member of the board.
  • Q: Can a director or officer become personally liable for their actions?

    Ans: Yes, a director or officer can be held personally liable for their actions.
  • Q: Are directors and officers or board members’ personal assets at risk?

    Ans: Yes, the directors liabilities are unlimited which can result in loss of personal assets at the time of insolvency or any claim and this policy can cover the personal assets of the directors.
  • Q: Does the Directors liability insurance policy cover penalties and fines?

    Ans: The policy will only provide coverage for civil penalties and fines levied on the policyholder for violating the laws or regulations.
  • Q: Does the D&O insurance policy cover the entity?

    Ans: 1. Entity is covered under employment practice liability (EPL). It protects the company from claims arising out of inappropriate workplace conduct such as retaliation, discrimination, defamation, sexual harassment, failure to promote, etc. wrongful acts of the employment process.
    2. Entity security covers corporate entity when the claims are raised against the entity along with securities it has issued.
  • Q: Does D&O insurance provide coverage for legal defence?

    Ans: Yes, D&O insurance provides coverage for defence costs. It provides coverage for the cost of a breach of occupational safety and health laws along with workplace death.
  • Q: What information do I need to provide to get the D&O insurance policy covered?

    Ans: 1. Name and address of Insured 2. Shareholding pattern 3. An audit report of the Company
  • Q: How does the insurer finalise the D&O Insurance cost?

    Ans: D&O insurance cost depends on certain factors such as the nature of business, potential risks involved, risk appetite, revenue, financial position, claim history, etc. Also, organisations that have long operation history will pay less than startup companies.
Average Rating
(Based on 23 Reviews)

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Director Officers Liability Insurance Reviews & Ratings
4.5 / 5 (Based on 23 Reviews)
(Showing Newest 10 reviews)
Bhuj, October 03, 2022
Extensive Coverage
We thoroughly checked all the benefits and features and decided to buy a contractual liability policy from Policybazaar. It provides all the necessary features to safeguard our business against any loss.
Chandigarh, October 02, 2022
Easy to Buy
It was easy to buy insurance from Policybazaar and customer support was also amazing to clear all the doubts. Contractual liability insurance is essential for my business and I could not get a better deal than this.
Valsad, October 01, 2022
Easy plan comparision
An ideal Contractual Liability Insurance policy purchased to protect our business that we ecounter in our everyday operations. Policybazaar offers a platform to compare multiple plans.
Himachal Pradesh, September 30, 2022
No broker and paper work
Great experience at Policybazaar. We did not know that buying Contractual Liability Insurance could be that easy. Also there is no broker and paperwork.
New Delhi, September 29, 2022
Perfect Insurance Coverage
I purchased Contractual Liability Insurance from Policybazaar and the coverage they provided is perfect to keep my hardware business safe various unforeseen instances.
Faridabad, April 10, 2022
Legal cover
I was looking for a directors and officers liability insurance online. I wanted to cover the working officials with a legal coverage in case any of the customer sues them after getting affected by any of their decisions. So it went on to the Policybazaar website where i could get a plan that provides me with legal coverage. Thanks Policybazaar.
Kannur, April 07, 2022
Legal cost covered
I got the directors and offiers of my organization covered under the directors and officers liability insurance policy. It covers the legal cost in case anyone sues the diector or officer for any decision made.
Bikaner, April 04, 2022
Easily renewed
I purchased DandO insurance plan an year ago and it was about to expire so i went on the Policybazaar and filled my policy number and accessed my account and easily renewed the insurance plan.
Amritsar, April 01, 2022
Easily renewed
I purchased a DandO insurance policy online an year ago. It was about to expire so i had to look for a website where i can easily renew it. I went on the Policybazaar website and easily renewed the policy in a matter of seconds. Thank PB
Bareilly, March 29, 2022
Compared and Bought
Was looking for a Directors and officers insurance policy online. I landed on the Policybazaar's website and trust me it is the best website as it lets you compare different plan on one page and then purchase the one that suits your requirements.
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