7 Signs It’s Time for You to Purchase D&O Insurance

What’s the most mysterious kind of insurance?

An insurance so enigmatic, so inscrutable, it only goes by its initials… like 007 or Mr. T?


This intriguing type of coverage could only be D&O insurance.


While you might not immediately recognize what those initials stand for, if you’re a director, manager, officer or board member at a for-profit or non-profit organization, you really should know.



But if you’re not sure, you’re definitely not alone; according to the results of an extremely scientific and accurate study that definitely happened, only one out of ten people surveyed can correctly guess what ‘D’ and ‘O’ stand for.

Give it try! Is the correct answer:

A. Ducking and Obscuring

B. Duffers and Oafs

C. Divert and Objectify

D. Down and Out

E. Directors and Officers

If you guessed E, congratulations! D&O does indeed stand for “directors and officers” and, in reality, it’s not mysterious at all.

In fact, this type of liability coverage should be on every leader’s radar. Why?

Because D&O insurance goes beyond general liability, protecting the personal assets of directors and officers (as well as their spouses) if they’re personally sued while managing a company.

Keep reading to learn more about this essential coverage and explore how D&O insurance benefits your organization.

What is D&O Insurance?

As you may have guessed from it’s name, D&O insurance offers protection for (obviously) directors and officers, but also provides coverage for managers, board members and their spouses.

This type of insurance kicks in when the policy holder is personally sued for alleged wrongful acts while in a management capacity; such lawsuits may be brought by employees, customers, clients, vendors, competitors, investors or others.

D&O insurance may cover legal expenses incurred in a lawsuit, as well as settlement and judgment costs.

While many believe that D&O is only necessary for publicly held corporations, private businesses and non-profits also benefit from the protection this type of coverage offers. Here are seven signs it’s time for you to purchase D&O insurance.

  1. Leadership can be held personally accountable for claims. 

Directors, managers, board members and other leaders may be personally sued, putting their personal assets (and those of their spouse) at risk.

D&O insurance offers protection for claims that aren’t usually covered under general liability insurance.

What types of claims are usually covered by D&O?

  • Misusing organization funds
  • Failing to act as a fiduciary
  • Fraud
  • Non-compliance with laws and regulations
  • Intellectual property theft
  • Corporate governance failure
  1. D&O lawsuits are on the rise.

Research indicates that the number of D&O lawsuits has increased over the past decade, a trend that is projected to continue. According to the Insurance Journal, courts are more inclined to hold executives responsible for corporate crimes.

The ever-increasing risk of cyber attacks and digital crime also opens organizational leaders to claims of inadequate risk management and poor oversight of information security. These trends put management at risk of lawsuits.

  1. D&O coverage attracts high-quality candidates.

D&O helps HiringToday’s directors and officers realize the risks inherent in leadership. When an organization offers D&O coverage, it sends the right message to prospective hires or board members.

Simply put, offering D&O insurance makes your organization more attractive in a competitive market, helping you recruit and retain high-quality management and board members.

  1. Investors like D&O insurance.

Will your organization expand in the future? If so, you’ll need capital. Whether that funding comes from venture capital, private equity or generous donors, your financial backers will require degree of security.

After all, external investors are taking a risk, and they want assurance that they’ll have recourse should an executive or director fail in their duties. D&O insurance provides recourse, boosting investor confidence.

  1. D&O offers protection from regulatory exposure. 

While many might think that regulatory issues mainly affect publicly traded companies, private businesses and non-profits also face risk of government enforcement. Defending a director or officer against a government enforcement action isn’t cheap, and D&O insurance can help mitigate this risk.

  1. D&O insurance protects an organization’s bottom line. 

Let’s face it: indemnifying leadership may result in financial losses. D&O claims run the gamut, from minor allegations from a single employee to massive class action suits brought by shareholders.

If these allegations lead to substantial financial loss, it can have a significant impact on an organization’s balance sheet, affecting performance over time. D&O insurance that reimburses an organization protects both leadership and company, helping manage costs incurred by an organization when it defends its directors.

After all, costs associated with D&O investigations and lawsuits commonly run into the hundreds of thousands and higher, a loss that would be devastating for many organizations.

  1. D&O covers exposures that other types of policies don’t.

You may think that you don’t need D&O insurance because you have an umbrella policy, general liability or worker’s comp.

While these types of coverage definitely have their place, they don’t always offer the protection that your leadership needs. D&O covers certain risks that aren’t covered by other policies. Ensuring that your leadership is fully covered will give them the peace of mind they need to do their jobs to the best of their ability, allowing them to focus on making the best decisions for the organization, rather than worrying about their exposure.

It’s not a mystery: all organizations with leadership — whether private, public or non-profit — can benefit from this type of coverage. D&O policies offer protection for leaders and organizations alike. To learn more about the D&O insurance options available in New York, reach out with the button below.



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