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Purchasing D&O Insurance? Here's What You Should Know

Purchasing D&O Insurance? Here's What You Should Know

Directors and officers in organizations are likely to get sued for a variety of reasons, mainly on the basis of the critical decisions they take in their managerial capacity. As a director of a firm, you may be familiar with the complex environment of business operations that often puts you on the line. Claims may arise from investors, competitors, customers, vendors, and employees. To deal with all these types of claims you need Directors liability insurance that provides liability cover for the key people of the organization.

Having the right director’s liability insurance can provide a certain degree of financial security against these costly lawsuits.

Why Do You Need Directors Liability Insurance?

With the increasing importance of transparency and accountability in the corporate sector, you face the countless number of exposures that have the potential to harm you financially. Also, the Companies Act 2013 is there to protect the interest of various shareholders and stakeholders of an Indian organization. Regardless of your company’s size, the legal costs associated with a lawsuit can cause significant problems for both the organization and the directors. Directors liability insurance protects the company as it covers legal fees, settlements, and other costs.

Below are some of the most common reasons why directors and officers get sued:

  • Breach of fiduciary duty
  • Misrepresentation of company assets
  • Misuse of company assets
  • Fraud
  • Theft of intellectual property
  • Failure to comply with workplace norms
  • Lack of corporate governance

Imagine a situation where a dissatisfied client sues a firm because they allege that they faced losses on their investment in the firm. They might blame the directors for the losses because they are the key decision-makers in the company. In such a situation, directors liability insurance covers the allegations of wrongful acts made on the directors and officers. It takes care of the financial losses arising out of the claims without causing the business finances to suffer.

How It Works

In the event of a legal suit filed for a claim, a directors liability insurance covers the legal cost and provides reimbursement to the directors of the company in case of wrongful allegations. The lawsuits arising out of such matters often carry huge numbers. Therefore, you must arm your business with the right directors liability insurance.

Regulatory agencies have strict norms for private companies, which makes directors liability insurance more necessary. As you know, paying the cost of an attorney to defend your case is an expensive affair. This is where directors liability insurance comes to your rescue and helps you to engage a good lawyer to win the case.        

Inclusions and Exclusions 

While buying directors liability insurance, it is crucial to know all about the inclusions and exclusions to make the right choice. The coverage varies from policy to policy, but some of the standard inclusions under directors liability insurance are defence costs, legal heir costs and settlement fees if your company cannot indemnify them. The policy will reimburse the company’s financial losses due to wrongful allegations on the board of directors. 

On the other hand, the policy won’t cover claims arising due to dishonest or fraudulent acts committed by the directors and senior executives. The general exclusions of a directors liability insurance policy include willful violation and illegal practices.

Secure Your Company with Directors Liability Insurance

Looking at the risks associated with running an organization, the need for directors liability insurance is quite evident. To avoid substantial financial losses in your business, you must have the right policy to back you up. Reputable insurance brokers such as SecureNow offer comprehensive policies from various leading insurers for you to choose the most suitable one. They have a strong claim support system that manages all the aspects of claims, including insurer, surveyor and documentation. Also, you should make sure you buy a directors liability insurance policy that provides worldwide coverage if your company operates in multiple nations.

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