D&O Liability Insurance is a must have liability coverage for small business owners

Director’s and Officers liability insurance, otherwise known as D&O Insurance provides insurance that protects  officers and directors of both nonprofit and for-profit companies from liability for monetary damages that result from actual or alleged wrongful acts committed while performing their duties for the company. Director’s and Officers liability insurance also covers expenses associated with administrative, civil, criminal and regulatory proceedings relating to actual or alleged errors, omissions, neglect or breach of duty.


Why is D & O insurance a must have coverage for a small business? It is because Directors and Officers can be held liable for decisions they make while acting on behalf of the company. Typically claims will be made by stockholders, clients or employees who feel they have been damaged financially by the actions of the directors or officers. D&O insurance allows the executives of the company to transfer liability for their actions to the insurance company and protects the directors and officers personally and the company as an entity. If this coverage was not available it would be very difficult, if not impossible, to hire directors and officers for any corporation.


In addition to D&O coverage these policies also typically cover Employment Practices Liability and Fiduciary liability. Employment Practices Liability insurance covers the insured for actual or alleged wrongful termination, wrongful discipline, harassment, discrimination, or retaliation. Fiduciary liability will cover those individuals in the company who are responsible for administering employee benefit plans such as pension plans, ESOP plans or 401K plans.


Business auto insurance policies coverage may vary, but generally most policies cover medical payments of the insured party, physical damage of the insured vehicle, property damage to third party, bodily injury to third party and third party fire and theft. Items such as company advertising logos and decals on the vehicle may also be covered. Because every small business has different needs, most business auto insurance policies can be customized. However, commercial auto insurance policies require that the business owner specify which vehicles are to be  covered as well as potential drivers of the vehicles listed on the policy.


It is important not to confuse D&O liability insurance with general liability, or errors and omissions liability  insurance because they are very different in terms of the risks they cover. General liability insurance on one hand covers the liability hazards associated with the premises or operations of the insured while errors and omissions coverage typically provides coverage for liability arising out of advice or services performed for a specific client.