Common D&O Myths

Common D&O MythsDirectors and Officers, or board members, are the backbone for a variety of industries including nonprofit organizations, public companies and the private sector. While there are some misconceptions about the insurance needed for each sector to reduce Directors and Officers Liability, it’s important to note that companies are not required to have shareholders to be eligible for getting sued. Here are some common myths about the coverage and how important it is for these professionals to be protected.

What is Directors and Officer’s Insurance?

According to Novick Group, D&O is intended to protect board members against allegations of wrongdoing that may arise from their roles in the governance and administrative management of an organization; In the Nonprofit version of D&O insurance, directors, officers, committee members, employees, and, in some cases, volunteers acting at the direction of the association are all insured under the policy.

Myth #1: D&O is not a Necessity

This couldn’t be further from the truth. Board members and their associations need to transparent about the potential risks they face in order to properly secure them. Especially for public companies, this coverage is essential and often determines whether or not the director or officer will accept the position. Even well-run and respected companies need to carry this coverage. To put it into perspective, Nonprofit Quarterly states that the average claim amount for wrongful acts by these professionals ranges from $23,000 to $33,000.

Myth #2: More Coverage is Better

This is true. As D&O policies vary greatly depending on the company, these professionals need to ensure that not only the deductible and coverage limits are appropriate for their needs, but also that each potential exposure is covered.

Myth #3: One Policy Fits All

As we mentioned above, not all policies are created equally. Ensure that the scope of threats that your clients face are defended with a comprehensive insurance portfolio. This includes bodily injury, crime, dishonesty, and even pollution liabilities.

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