7 Reasons Your Business Needs Directors and Officers Insurance

Although it might be tempting for your company to forgo directors and officers insurance coverage, it is an executive liability that all businesses should take a serious look at. Most businesses, large and small are aware of the reasoning behind coverage for their building, property, and liability, but often overlook the importance of protecting what some would argue is a business’s greatest asset – their employees, or more specifically, their leaders, whose actions have an effect that is felt throughout the entirety of the business.

Defense Costs

The directors and officers in your business, often times companies will be forced to handle the defense costs when directors and officers come under legal attack. Because of their position within the company, many of these claims may be unfounded. Defense costs for employees in a lawsuit are not generally covered by in the liability clauses of most business insurance policies.

Employee Failure that Impacts the Company as a Whole

People make mistakes, and sometimes the mistake of a single individual can be felt throughout the entire company. Perhaps an executive in your company forgot to file important paperwork, which has opened your company up to huge fines and legal ramifications that would otherwise impact your workforce as a whole. Directors and officers insurance can help to protect your company from situations similar to this.


Are you a part of a nonprofit organization? If you are, or have dealt with one, then you know how difficult it can be to get potential suitors to agree to be a part of the volunteer board for these organizations while exposing themselves to liability.

If they are going to be partially in charge of operations and the employment of many individuals for your organization, it is important to let them know that you have directors’ and officers’ coverage in place to protect them from the liability. If the board of a nonprofit is forced to tighten the belt of the organization and make cuts to staffing, it is important that you have these protections in place.

For Profits

For profit companies face problems not too dissimilar to nonprofits, with more at stake.

Lawsuits against officers and directors can come from a variety of different angles, from previous employees, government organizations, companies you do business with, and shareholders. It is important that you protect your company, as well as any directors and officers that could also be potentially being named in any lawsuits for peace of mind and forward planning.


Although every company would like to think that they have been flawless in the hiring of their directors and officers, situations involving fraud have been known to occur. It is important that you protect your company, and other directors and officers from the potential fallout of a board member going off the deep end.

Paperwork Errors

One common problem that many companies get into is the inability to verify facts that directors and officers state in official documents. Of course, every company should make it their policy to verify all facts on official forms before sending them in, but sometimes mistakes do happen. Paperwork errors can cause months’ worth of headaches and ongoing costs for companies and officers.

Failure to Supervise

If a director or officer fails to do their job correctly, and this results in losses for the company, shareholders may be prompted to take legal action against your company.

Directors and officers insurance can help you to protect your company against these circumstances, and ensure that any lawsuits that come your way are going to be covered under your policy.

There are dozens of reasons or specific situations in which a company could benefit from directors and officers insurance coverage, unfortunately many companies are not proactive about it, and wait until after their first incident to seek it out.

Author Credits ::

This article was written by Anna Peterson who works for MedicareSupplementalInsurance.net