D&O cover can be essential for many businesses
There are many misconceptions about Directors and Officers (D&O) cover. Many owners and managers at SME businesses think it irrelevant to them, or else assume that the business having Limited Company status means that they, as Directors, are afforded full protection from prosecution should something go wrong. In fact, D&O Insurance can be cost effective and invaluable. We’ve pulled together a ‘Frequently asked questions’ article here, specifically to address some of the most common issues and concerns that our clients have.
“D&O is only for very large companies and so I don’t need it”
Every director, officer or manager is open to claims. Claims can come from absolutely anywhere: customers, competitors, suppliers, employees, prospective employees, past employees, the company itself, regulators, Customs & Excise, Health and Safety Executive, HMRC; the list goes on.
“We don’t need D&O cover because the directors are covered under the Limited status of the business”
Many directors assume they are covered by being a limited company, but this this is not the case. Shareholder’s liability is limited, but that of directors and officers is not, even if an individual is both. The possible liability attached to the role can see the director or officer’s own cash, home, pension pot and other assets, even their liberty, taken from them if a claim should occur.
“We can’t afford it”
In the event of an action against you, can you afford not to have D&O cover in place? D&O can be as inexpensive as £100 for the year, paid by the company and covering all directors and officers in the organisation. Rates will obviously vary dependant on the size of the company, but in a world that is increasingly litigious, it can be a worthwhile investment.
“It’s too complicated”
Insurance policy wordings can indeed be complicated. That’s why it pays to use a broker who can help you understand how a policy may or may not be appropriate for you, and what benefits it will give you. To get a quote for D&O cover, we ask for financial information, such as turnover and confirmation of solvency. We’ll also want to understand a little bit about your business and its history, so that we can find appropriate cover for you.
“The company will pay”
A common assumption by many directors is that the company will pay for any incidents involving directors or officers. Legal costs can run into the hundreds of thousands and beyond, and in some circumstances a company may pay. In many situations, the company may be unwilling or unable to pay the escalating costs and the director or officer may be left high and dry! Having the company pay for D&O may be an alternative option and encourage managers and directors, who may be worried about litigation, even though they are acting correctly, to have confidence in their actions.
“My insurance renewals aren’t due yet”
D&O cover is a standalone policy which can be taken out at any time. Don’t delay and make sure you are covered.
If you are not covered for D&O, please contact us soonest for a no obligation quote on 0118 979 2121. BJP’s trained brokers are here to help you make an informed decision about your business and protecting your most valuable assets.