Can Directors Buy D&O Policy for Themselves?

Directors of an organisation do not purchase a D&O policy for themselves. It is the organisation that buys this policy for them. Moreover, the personal assets of a director or officer might come under the strain of a claim. Hence, it becomes crucial to verify if the organisation provides such insurance and protects the interests of a director.

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D&O Policy

An organisation may have multiple directors. Their name might be present in a liability claim along with the organisation. Therefore, buying independent D&O insurance for each director is not practical.

The company may face various issues while finding the liability of each director. Hence, a single policy can be bought covering every director and officer of an organisation. The policy can cover the director named in a lawsuit.

Risk Faced By Directors

  1. Cyber Attacks

    Since the lockdown, cyber attacks witnessed a sudden increase. The insurance companies registered several claims at once. Hence, the companies started increasing the premium amount and decreasing the policy coverage.

  2. Data Loss

    Data is the backbone of an organisation. If it losses, it may compromise the interest of the shareholders of the company.

  3. Insolvency Claims

    The directors and officer insurance policy protects the directors during the insolvency and bankruptcy of an organisation. It helps the organisation and directors filing bankruptcy for the company in the tribunal.

  4. Shareholder's Claims

    The company and directors may face several claims from the shareholder in case of loss in business. The D&O insurance indemnifies the directors and top management from such claims.

Conclusion

D&O insurance is a type of liability policy. Since the directors and officers of a company takes several critical decisions on a daily basis for the development of a firm, a firm should secure its directors and officers against the claim made by a third party. Hence, they may make an error or omission during the course of their employment. Therefore, the company must provide them D&O policy.

Written By: PolicyBazaar - Updated: 27 March 2023

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