Small businesses in India are on a rise and, thus more insurances and coverage plans are evolving to meet the needs. Speaking of which, the D&O liability insurance is still considered as an insurance policy that meets the requirements of already established companies, and companies. But it is high time you moved past this misconception. The D&O policy is equally essential for small-scale businesses like they are crucial to a large-scale entity.
An overview for D&O policy coverage
Before getting into the details of the D&O policy, you have to understand how the D&O policy works. The Director and Officers’ liability insurance covers the high-ranked professionals in a company when they face lawsuits from employees, stakeholders, clients, and regulatory bodies. The insurance company reimburses the cost incurred for the defense legal proceedings and other penalties imposed on the policyholder. But, on what grounds can the professionals face litigation or penalty? The reasons can be many but, the elementary cause lies with the action or conduct of the policyholder.
Common reasons for policy claims
A director or executive officer in a company or business has several professional duties and responsibilities. Every responsibility relates to the overall development of the associated company. A mistake or mismanaged action can cause monetary losses to the company. In fact, the employees, stakeholders, consumers, clients can also face losses. In return, they bring legal allegations against the designation-holder and demand compensation.
The different reasons that cause a claim generation for the D&O policy can be the following –
- Mismanagement in professional duties
- Irregularities in handling company or business funds
- Breach of corporate laws and social acts
- Misstatement and misleading actions
- Wrongful termination, discrimination, and unjustified employment practice
- Lack of corporate governance
SMEs are easy targets.
Small and medium enterprises do not always have an in-house legal team. Most established organizations have an in-house team to meet the requirements for minor legal disputes. But it is not so easy for SMEs. For any legal issues, the SMEs have to seek external assistance for meeting the legal procedure requirements.
The lack of legal resources in small businesses and enterprises creates an advantageous ground for those filing a case against them. They can easily target small-scale businesses for any minor inconvenience on irrelevant grounds.
Buying the D&O liability insurance helps in better risk management. The different agreement clauses in the D&O policy (Side-A, B, and C) provide coverage benefits for the individual professionals and to the company as well. Hence, small businesses can manage the expenditure better with the policy coverage benefits in the long run.
From the perspective of small business owners
Even though it is evident that small businesses necessitate the policy, most small business owners are still in a dilemma about purchasing the same. Why? Because of the cost factor. For this, many business owners try to find a bundled offer that covers it all. But in the long run, having a separate D&O policy will come useful for your requirements. The coverage boundaries get broader with the specific insurance offerings. So, it is better to opt for liability insurance and include the coverage agreements rightly so that you can utilize the policy coverage benefits in times of need. A partial coverage from a combined policy offer may not work fruitful during legal proceedings or a heavy penalty.
- The need of the hour: Also, with the pandemic impact on businesses all around the world, it has become the need of the hour for small businesses to think of a better solution. D&O policies can cover the legal allegations brought against the business as a consequence of the nationwide lockdown. For example – if a stakeholder of the business files a lawsuit for the irresponsive action of a director during the pandemic, the policy can help meet the cost in the defense proceedings. Thus, small businesses now need D&O liability insurance more than ever.
Is it expensive for small businesses?
The cost of a D&O policy depends on the policy coverage and agreements you want to include. Also, with the different insurance companies in the market, the overall cost varies at large. As a small business, you can find an insurance broker to specify the coverage requirements to get a policy that suits your budget.
Advantages of D&O policy for small and medium enterprise
Without knowing the advantages of purchasing the policy, you cannot decide if the insurance is apt for a small business. So, to make your decision easy, here are some specific advantages of the D&O policy that can be beneficial for any small business, irrespective of the functioning domain. Read below to understand better –
- Get qualified professionals aboard – Small businesses require the assistance of qualified professionals to help in expansion. So, the high-ranked officers need to have a bright professional profile to make the process better. But not every small business can afford the cost of hiring such competent resources. Offering the D&O policy can ease the procedure. It makes the offer lucrative, attracting competent talent who can make the business prosper.
- A way to attract investors – Finding investors for small businesses can be a difficult task. Especially at this moment, when the economy is affected by the pandemic blues. So, investors shy away from investing in small businesses to reduce the risks. Offering such policies to the high-rank holders in the company develops better business credibility and a long-term vision for risk management. It helps investors to recognize the potential of the business and thus making your business grow with lump sum investments.
A wise step for businesses
With such benefits and coverage aspects, don’t you think the D&O policy is a great business tool for risk management? Protect the high-ranked executives in the company and their assets with the insurance plan. Operate with confidence among the established entities in the market.
Connect to PlanCover
Find the best D&O liability policy with PlanCover. The leading insurance broker in the company, PlanCover, helps businesses identify the right insurance plans that match their requirements. Get in touch with their team and get the insurance you require.