The D&O Insurance is an integral part of the corporate risk management. Small businesses across India have recently started giving it importance. Whether the company is private or public, it should get a comprehensive D&O Insurance to manage risk and avail a wide range of benefits.
There are lots of cases where the insurance plays a crucial role and cover the expenses. But, before knowing those, it is important to know few related aspects.
The main objective of the insurance
The main objective of a D&O insurance policy is giving a strong financial support when directors/officers have to face a lawsuit. The insurer pays the legal expenses on behalf of the accused. The directors/officers do not have to worry about bearing the legal costs of the case.
Buying the insurance
It is wise to rely on the portfolio of a top insurance broker in India when you consider buying the policy. The broker should be goodwill in the market. Enquire relevant details about various aspects of the insurance before you buy it from the service provider.
There can be different D&O offerings
Keep in mind that there can be multiple D&O offerings from the insurers available in the competitive market. You need to choose the one that suits your business needs the best. So, it is not a good thing to rush when you decide to buy the right insurance product.
Go through the insurance policy document
It is rational to thoroughly read the extensive features of the insurance, mentioned clearly in the policy document of the offering. Do not overlook any point in the document. Take your time to go through each page.
Clear your doubts with the insurer
You have to clear traces of confusion, if any, by talking to the insurer or broker, before you purchase the policy. There should not be any doubts in your mind. Place your queries to the service provider regarding different components of the insurance. Also, know about various terms related to the applicability of the insurance.
You may hire an advisor
If you feel, after assessing the situation, to hire an expert for recommending an appropriate D&O Insurance Policy, then go ahead. The advisor can give you valuable insights about purchasing the insurance from a reliable broker.
Check out the premium you need to pay
It is crucial to check out the different options of premium amounts you have to pay to the insurer to secure the D&O insurance policy. The document will have the required details that, as mentioned before, you need to sincerely go through.
Have clear ideas about the insurance amount you need
You must have clear conceptions about the total insurance amount you need from the policy. There can be various slabs. You should talk to the broker or insurer about the correct slab. Also, you need to consider the specific needs of your business.
After a detailed assessment of relevant factors, it is possible to know the amount that you will need from the insurer.
Understanding the range of risk scenarios
When you are aware of the various risk scenarios associated to the applicability of the D&O Insurance Policy, it is possible to understand the scope of the policy. As a person who is in charge of recommending the policy to a company, you should know the different scenarios.
The risk scenarios where the policy plays a role
The lawsuit can be filed by a shareholder, employee, customer or a third party vendor. The scenarios are multiple. The claimant can accuse the directors/officers of misappropriation of valuable business data critical for competition.
The accusation can also center on corporate manslaughter, in which an employee or even a group of employees can file a lawsuit. Negligence of duties is another case in this regard.
There can be legal cases accusing the directors/officers of copyright infringement and/or violation of patent laws.
A person filing the lawsuit can also accuse the senior executives of deceptive or non-transparent trade practices. The lawsuit may focus on intentional and wrongful restraining of business.
In each of the cases above, and in many cases similar to these, the expenses of the attorney are considered by the insurer, according to the policy document of D&O Insurance.
The particular things that the D&O Insurance covers
There are three broad things that the insurance policy covers. As an executive or director concerned about the coverage, you must be aware of these things. The details are clearly mentioned in the policy document of the insurance.
- The personal assets of the directors/officers. The assets can fall under both categories – movable and immovable.
- The assets of the company. Again, the assets can be of any nature.
- The reimbursement costs/settlement expenses/legal fees concerning the lawsuit that the company fights hiring an experienced attorney.
The types of companies that the insurance covers can be public organizations or private entities. Also, the policy covers NGOs. As far as your small business/company is registered, you are eligible for getting the policy under the name of the company. Keep in mind that availing the D&O insurance is not mandatory. You can opt out from it.
Get details about the coverage
You must, on a priority basis, gather relevant details about the extent of the coverage from the broker or insurer. The scope of coverage can vary, depending on a range of corporate factors. You should have the information before purchasing the insurance policy.
The policy covers the balance sheet
Covering the company means protecting its balance sheet. The D&O insurance policy does it efficiently. The balance sheet of the entity remains intact, when the company counters the lawsuit. The D&O insurance has enough provisions to shield the balance sheet of the company.
Purchase the policy from a top broker
If you are thinking of buying a D&O insurance policy, then consider contacting PlanCover, a top-rated insurance broker operating in the Indian market. The agency has extensive experience of selling a broad spectrum of insurance products to hundreds of small businesses in India. You can be confident of receiving ample support from the agency.