Directors and Officers Liability Insurance

An organisation no matter how small or big runs well because of its employees but can grow mainly because of the critical decisions made by the senior managers and directors. Being at the top of the employment hierarchy, the directors are indeed its most significant assets. Depending on the key responsibilities they handle, they are also highly vulnerable to allegations or lawsuits filed by various stakeholders. It is not limited to a for-profit organisation but also includes even SMEs and non-profits. 

If you own an organisation, it is crucial for you to protect your board directors against allegations and false claims. As the corporate environment in India is becoming more litigious, the leaders of your organisation should be given liability protection. For this, you need to invest in D&O liability protection insurance.

Here are five reasons why you should buy D&O insurance policy coverage:

To Attract Competent Directors and Officers

Organisations actively look forward to expanding their boards with competent directors and officers to lead their business towards next-level growth. At almost all times, the demand for qualified leaders in the market remains high.

At the other end, even qualified leaders consider personal liability protection an essential factor while joining even the leading organisations in their field of interest. It ensures that their personal assets will not be placed at stake ever. 

So, if your organisation buys D&O insurance, it can attract experienced leaders in your industry to join the board.

To Lure Investors

A lot of organizations look forward to financial assistance from investors and venture capitalists while planning their expansion. At the investors’ end, there is a significant risk involved, which they counter by asking for substantial ownership in the organization and joining its board of directors. 

You may also find some investors asking for a certain degree of security over their investment in the form of D&O liability protection. It also gives them the right to recourse against the organization should it fail to manage its operations as expected.

Additional Read: Why Investors influence their funded startups to buy a D O Liability Insurance Policy

So, investing in Directors and Officers liability coverage can attract the right investors to your organization.

To Maintain Financial Protection

When not having liability protection, an organization will have to indemnify its senior management as per corporate provisions, which can cause considerable financial losses. These losses may leave a lasting impact on the financial performance of an organization at the end of the present financial year or even beyond that. 

You can prevent such litigations and lawsuits from hampering your company’s performance by buying directors and liability insurance with adequate coverage. It will provide the required shield against the potentially catastrophic effects of liability claims.

To Proactively Mitigate Legal Risks Involved

For every organization, it is crucial to stay prepared for complications, be it financial, legal, or others whenever they arise. The companies who do not have dedicated risk and compliance policies are often found struggling to face legal procedures. 

On the other hand, organizations which willingly invest in D&O liability protection coverage are proactive and well-prepared to deal with various possible circumstances. The claims made by stakeholders under different litigations get settled by the chosen insurer, thus formalizing the risk management process. 

To Ensure Higher Productivity from the Directors

Senior management that includes the directors, founders, and other core people in every organization have so many responsibilities to cater to. They need to think about the welfare of all the stakeholders, be it, employees, shareholders or vendors. It is fair to assume they are mostly preoccupied with several tasks in hands. 

Additional Read: Why should a start-up consider Directors and Officers(D&O) Insurance?

Any liability claims or litigations that arise usually disturb the executives’ priorities, making them lose their focus on the decision-making process. However, you can prevent it with the help of D&O insurance and prevent senior management from facing trouble. 

As detailed above, liability protection for your organization’s senior management is your responsibility. Make sure you buy D&O liability insurance from a renowned insurer. 

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