Director’s and Officer’s Insurance
Protect the directors and senior managers in your business in case a mistake is made
What Does D&O Insurance Cover?
Director’s and Officer’s Liability insurance protects your business’s directors and senior managers in the event that it is alleged they have made a mistake, taken a bad decision or committed a “wrongful act” in the course of carrying out their duties for the company. These allegations could be made by shareholders, investors, employees, regulators or other third parties.
Wrongful acts include:
- breach of trust
- breach of duty
- neglect
- error
- misleading statements
- wrongful trading
- Health & Safety breaches
Allegations need to be investigated and can be costly. Even if a case never gets as far as the courts, investigation costs can quickly mount up. This can have a significant impact on the alleged wrongdoer’s personal finances, which is why D&O insurance is an important way of protecting key senior individuals in a business.
D&O insurance covers the legal defence costs as well as any compensation awarded to the claimant.
Who Needs D&O Insurance?
All directors and senior managers should be covered by a D&O insurance policy. This should include all board members as well as non-executive directors too. In short, all senior directors and managers who are responsible for taking key decisions should be protected with D&O insurance, paid for by the company.
How Much D&O Insurance Do I Need?
As with other types of liability insurance, the amount of D&O cover you need will depend on a variety of factors. These include:
- the size of your business
- the sector in which you operate
- the value of projects that you work on or deals that you make
- the levels of authorisation given to directors and senior managers
- how risk averse your business is.
Our recommendation is always to have as much cover as you can afford to ensure the right amount of protection is in place should you need it.
What’s the Difference Between D&O Insurance and Professional Indemnity?
D&O insurance and Professional Indemnity insurance both provide protection against bad advice and accidental mistakes. However, there is a clear distinction between the two types of cover:
- PI insurance protects the business in the event that a client alleges they’ve been given bad advice or made a mistake that has resulted in financial loss
- D&O insurance protects the directors and senior managers in the event that one of them allegedly makes a mistake carrying out their duties as a director or officer of the business which causes harm, financial or otherwise, to others.
Need more
information?
Please call Tom Cowap or the team on 020 8290 9080 to talk through your D&O insurance needs. Alternatively, you can email us at business@anthonyjones.com
“Every business needs to have the correct insurance cover on all aspects of their business, this is time consuming and can soon become a headache.
Since working with Anthony Jones the headaches have gone and it’s the good honest support from them that has ensured they have kept our business for over 15 years now.”
James Dew
MD
Harwoods of London Ltd
FAQ’s
Some of our most asked questions, answered below:
I am a start-up business, what insurance do I need?
There is a balance between adequate and appropriate protection of the business whilst keeping initial costs to a minimum. Evaluate your business risks and the need for insurance under these 4 headings:
- Assets (both physical and intellectual);
- Revenue streams;
- Liabilities to Third Parties (including contractual obligations);
- People (your staff including their importance to the business).
Usually, a package type policy covering your physical property, annual revenues, Employer’s liability and Public/Product’s liability is required. The only insurances required by law are Employer’s Liability, Motor Liability (if you have cars/vans etc) and Engineering Inspection of lifting and pressure plant if you have them.
What is business insurance?
Business insurance is a type of insurance that provides cover for businesses against financial losses due to unexpected disruption to business such as property damage, liability claims, a cybercrime issue, an issue with a director's duties, a professional indemnity or a motor accident – amongst others!
Do I need business insurance?
If you own a business, it is highly recommended that you have business insurance to protect your assets. The only insurances required by law are Employer’s Liability, Motor Liability (if you have cars/vans etc) and Engineering Inspection of lifting and pressure plant if you have them. Increasingly, suppliers or customers will ask for evidence of insurance.
How much does business insurance cost?
The cost of business insurance varies depending on the type of cover you need, the size of your business, and the level of risk associated with your industry. Insurance brokers help with this presentation to insurers in seeking the most appropriate market and price.
How much Professional Indemnity insurance do I need?
If you work in one of the professions for whom Professional Indemnity insurance is a legal requirement, the amount of cover you need may be mandated by your regulatory body. You should check on their website to find out.
Your clients may also specify within their contract the amount of PI cover they require you to have in place to protect the work you do for them.
If the amount of cover you need is not pre-determined, you can work it out by thinking about the size of projects you work on and your potential exposure to risk. We can help you calculate what this might be. Our recommendation would be to buy as much cover as you can afford.
Do I need Professional Indemnity insurance?
If your business provides advice, professional services or creates designs, it makes sense to have Professional Indemnity insurance to protect you in case anything goes wrong.
For some professions it’s a legal requirement to have Professional Indemnity insurance in place. Professions for whom it is mandatory include:
- Solicitors and barristers
- Financial advisers
- Architects
- Accountants
- Some healthcare professionals, such as doctors, vets, dentists and surgeons
- Chartered surveyors
What is Professional Indemnity insurance?
PI insurance protects your business if a client claims the advice, service or designs you provided were faulty in some way. It will cover the cost of any claim for compensation.
What is Directors & Officers insurance?
Also called D&O insurance, this covers the cost of any compensation claims your business needs to pay if a director or key manager is alleged to have done something wrong during the course of their work. This might include negligence, breach of trust, making a mistake or failing to do a task.
Do the Government tax premiums?
Yes, they do. The current rate is 12% and is a charge collected by insurers on behalf of the Government. This tax has nothing to do with insurance brokers or insurers.
How do you earn your money?
Insurance brokers earn money in the form of commissions when business is placed with insurers. You have every right to ask a broker what commission they are earning from insurers. An alternative to commission is to quote premiums “net” and brokers agree a fee with customers for services.
Reviews
News
Public Liability & Employers’ Liability: What’s the Difference?
A lot of people confuse public liability and employers’ liability insurance, as they both seem to offer broadly the same sort of cover. In this post we’ll explain the key differences between public liability and employers’ liability insurance, to help you understand...
Ogden – Costs v Affordability …again!
We have talked about the Ogden rate in the past and its implications for the cost of personal injury claims. These tables are used to calculate the amount of compensation awarded to individuals who have suffered long-term or life-changing injuries. We talk about it...
An Overview of The Insurance Pricing Cycle – Soft and Hard Market Conditions
Insurance pricing goes through cycles driven by the supply and demand for insurance cover on a global scale. It alternates between periods of ‘soft’ and ‘hard’ market conditions. In a ‘hard’ market – insurance is harder to place, and premiums increase. We have...
Why Is Business Insurance More Expensive?
Do you feel like your business insurance is getting more expensive? You’re not alone. In this post we’ll discuss some of the underlying reasons behind why business insurance is more expensive. But one thing to bear in mind – in these uncertain times, working with an...