What is the big advantage of having a D&O policy over not having a policy?
Directors and officers of an organisation are tasked with complex responsibilities of managing the organisation so that it performs at its best level. However, during the course of their job, directors and officers might make mistakes which might lead the business as well as its stakeholders towards a loss. For such losses faced by the business and other interested parties, the directors and officers can be sued. The legal defence costs incurred are quite high and might cause a financial strain for the directors and officers of the company. This is where a Directors and Officers (D & O) Liability Policy comes into the picture. The policy covers the personal liabilities faced by the directors and officers of a company in case of any wrongful doings during the course of their job. The policy pays the defence costs incurred by the directors and officers in defending themselves from litigators.
Advantages of having a D & O policy
There are various advantages of having a D & O policy compared to not having one. These include the following :
- Mistakes made by D & O can be common and often costly
The chances of directors and officers committing mistakes when discharging their duties are quite high. They might knowingly or unknowingly take a wrong decision which would land them in legal trouble. If they are sued by the aggrieved party, which is fairly common in the corporate sector, they would incur huge legal costs in defending themselves. These costs could threaten to wipe out their life’s earnings and so a D & O policy becomes essential. By covering the liability of the directors and officers, the policy provides them with financial relief.
- The policy gives peace of mind
The best advantage of having a D & O policy is the peace of mind which the policy provides. The directors and officers are assured of the policy coming to their rescue in case of any legal issues relating to their duties. They can, therefore, work efficiently without worrying about the financial repercussions of their mistakes. Moreover, since the policy would cover their legal representation costs, the directors and officers also have the peace of mind in knowing that their personal financial position would not be threatened by any job related mistakes.
- It boosts employee morale
Directors and officers of a company which has invested in a D & O policy are often more motivated compared to a company which does not have the coverage. They know that they would be protected in case of any lawsuits and so it boosts morale and makes employees trust their companies more.
- It attracts talent
When hiring directors and officers if the organisation has a D & O policy in place, prospective talented candidates would be more open to join the company. The candidate would see that the company protects the personal financial liability of its directors and officers. The policy, therefore, would help organisations attract more efficient workforce for making the business more productive.
Besides these advantages, a D & O policy is also inexpensive and can be easily bought. So, invest in a D & O policy for your organisation and protect your employees against legal liabilities.