Here’s What Your D&O Insurance Policy Might Not Include

Heres What Your D&O Insurance Policy Might Not IncludeHere’s What Your D&O Insurance Policy Might Not Include

Running a successful business means you must keep all the stakeholders happy and satisfied. Sometimes, your decisions or those of other board members in your company are not accepted by all. Internal or external disputes can lead to lawsuits against directors and senior officers, which is why you need a D&O policy. What is this D&O Insurance Policy all about? How to choose a good D&O Insurance Policy that has full coverage and suits your business need?

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What Your D&O Insurance Policy Might Not Include?

Directors and Officers insurance, also known as a D&O policy, offers protection against legal liabilities arising out of allegations of wrongful acts.  It also helps in attracting the best talent for your organization. Just like other insurance products, it is based on specific terms and conditions, which differ from one policy to the other.

It often happens that business owners buy a D&O insurance policy without checking all its coverage benefits. If you already have a D&O policy, here are a few features it might not have.

1) Comprehensive Cover

Legal cases against your company’s directors can arise because of allegations of wrongful acts or financial mismanagement. Your customers, vendors, shareholders or employees can be the cause behind this. Your D&O policy might not provide comprehensive coverage if you have chosen it based on low premium only. Any clause that excludes a specific stakeholder from the policy terms may create trouble for you. For instance, if your policy does not include coverage against litigation filed by suppliers, you may need to pay a hefty sum in legal battles and compensation should such a litigation arise.

Hence, you must check and evaluate the scope of coverage of your D&O policy from time to time. You can even strengthen it to offer comprehensive coverage by paying a slightly higher premium.

2) Worldwide Coverage

Running a scalable, multinational company means managing operations beyond Indian geographical boundaries. This prospect also comes with the risk of lawsuits against your company from various stakeholders in foreign countries.

Take the case of a situation in which a group of suppliers based in Canada file a litigation against one of the directors in your company’s board. They make allegations of breach of fiduciary duties or alleged misconduct. You won’t get the insurance benefits of your D&O policy if it is limited to India for both territory and jurisdiction. As a result, you may end up facing significant financial losses.

Make sure your D&O policy provides worldwide coverage to support your global business operations. If it doesn’t, upgrade it for the same.

3) Full Defence and PR Expenses

A basic D&O policy covers legal liabilities. It pays for the cost of hiring lawyers to defend the accused in the court against allegations. However, it excludes many other expenses, such as responding to regulatory notices and investigation costs. This exclusion implies that  you will need to pay for these expenses out of your pocket if you have bought D&O insurance with only basic coverage.

One way to save money in this regard is to opt for add-ons that can help you reimburse the additional charges. You can even choose an add-on that covers the cost of hiring a PR consultant to rebuild your company’s reputation. 

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4) Employment Practices Liabilities

Just like suppliers or shareholders, your employees can file a case against your firm for wrongful termination, discrimination or sexual harassment. Filing a claim under your D&O policy won’t help if it does not include Employment Practices Liability Insurance (EPLI) extension.

As an employer, it is crucial for you to get coverage for employee-related claims under your D&O policy. Failing to do so may result in severe financial losses that will ultimately show up in your company’s balance sheet. 

Choosing the right D&O insurance policy with adequate coverage and add-ons can help you fight against the odds in the long run. You can connect with a reputable insurance broker like SecureNow etc., to select the most suitable D&O policy for your business.

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Team – Myinvestmentideas

Here’s What Your D&O Insurance Policy Might Not Include

Suresh KP

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