What is Directors and Officers Insurance?

As a business owner or director, you want to do what’s best for your company. But sometimes things can go wrong, even if you’ve…

As a business owner or director, you want to do what’s best for your company. But sometimes things can go wrong, even if you’ve acted responsibly. If you’re accused of wrongful trading or breach of duty, you could be facing personal financial ruin.

Directors and officers insurance (also known as D&O insurance) can help protect you from the cost of defending yourself against these claims, as well as any damages you may have to pay.

 

What does directors and officers insurance cover?

D&O insurance can cover the cost of legal fees and any damages you’re ordered to pay if you’re sued for wrongful trading or breach of duty. It can also cover the cost of investigating any claims made against you.

For example, D&O insurance would cover the cost of:

  • Defending a claim for wrongful trading, even if the case is eventually thrown out
  • Paying damages if you’re found liable for wrongful trading
  • Investigating claims made against you by shareholders or other stakeholders

D&O insurance can also provide some protection if you’re accused of fraud or other criminal offences.

 

Do I need directors and officers insurance?

If you’re a director or officer of a company, it’s a good idea to have D&O insurance in place. Even if you’re confident you’ve acted responsibly and within the law, you could still be taken to court. And the cost of defending yourself, even if you’re eventually cleared, could be ruinous.

If your company is listed on a stock exchange, it’s likely to have D&O insurance in place. But if you’re a director or officer of a smaller private company, you may need to arrange your own cover.

Common reasons why someone would need to make a claim on their D&O insurance include:

  • Being accused of wrongful trading (e.g. continuing to trade when you knew the company was insolvent)
  • Being accused of breach of duty (e.g. not acting in the best interests of the company)
  • Being accused of fraud or other criminal offences

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What is the difference between professional indemnity and directors and officers insurance?

Professional indemnity insurance protects you from the cost of defending yourself against claims of professional negligence. This could include anything from giving bad advice to making a mistake in your work.

Directors and officers insurance, on the other hand, protects you from the cost of defending yourself against claims of wrongful trading or breach of duty. It can also cover the cost of investigating any claims made against you.

So, if you’re accused of giving bad advice that leads to financial losses for your company, professional indemnity insurance would cover the cost of defending yourself. But if you’re accused of wrongful trading, D&O insurance would be more appropriate.

 

Is D&O insurance a benefit in kind?

No, D&O insurance is not a benefit in kind. This means that you don’t have to pay income tax or national insurance on any payments you receive under the policy.

A benefit in kind is a taxable perk that you receive as an employee, such as a company car or private healthcare. D&O insurance is not a benefit in kind because it’s designed to protect you from the financial consequences of being sued, rather than providing a benefit.

 

How much does directors and officers insurance cost?

The cost of D&O insurance varies depending on a number of factors, including the size of your company and the level of cover you need.

Some insurers will offer discounts if you take out other types of insurance with them, such as professional indemnity or Employers’ Liability insurance. It’s always worth shopping around to get the best deal.

 

Looking for competitive quotes on your D&O insurance?