Should Mid-Sized Businesses Have Directors & Officers Insurance?

Directors and officers within your company hold a level of respect and esteem, but they also tend to carry a higher level of risk than other employees and managers of the company. That is why it’s important to consider whether or not your directors and officers need D & O insurance. This type of insurance, a form of liability coverage, can help minimize risks associated with these higher ranking individuals. But, does your mid-sized company need to protect officers in this manner? There are a few key things to keep in mind.

Private vs. Public Companies

One key misconception about D & O insurance is that only publicly traded companies need it. That's not the case. Privately held companies do not have risk related to a securities class action suit. However, if the company has directors and officers, these individuals can be sued personally for actions taken within the company. This type of business insurance minimizes the losses from such a lawsuit.

Is General Liability Insurance Enough?

Almost every company maintains general liability insurance. Some companies also have professional liability insurance and/or umbrella insurance. These are valuable policies, but they do not necessarily offer enough insurance coverage to meet all needs. Additionally, these policies do not provide protection from management liability lawsuits. This leaves your upper management exposed to this risk.

Do You Have Directors?

Another misconception is that only large companies have directors and officers. That's not true in most cases. If you have officers within your company that are making key decisions for it, these individuals could be sued. Businesses of any size tend to have some upper level of management that is at risk in these situations. Additionally, if your company is smaller without a large number of directors or officers, you can often find more affordable D & O insurance policies. Small business executive liability coverage, as it is often called, may be significantly lower in cost but it provides significant protection for companies.

Take a closer look at your current business insurance. Does it meet all of your needs? If you feel your directors and officers could still be exposed to risk, now is a good time to have a policy added to it to minimize this risk.