Why Business Owners Might Need Extra Insurance

Small-business owners frequently encounter increased liability concerns during the course of day-to-day business.

So do start-ups, not-for-profits and others engaged in business.

In most cases, general liability coverage provides a level of protection suitable for most unanticipated situations.

However, it might fall short in some instances.

General liability coverage often specifically excludes criminal activity or other omissions of directors or officers.

Liability coverage for directors and officers, commonly referred to as D & O coverage, bridges the gap by protecting both directors and officers as well as the organization itself from damages.

The liability coverage also protects officers and directors from the defense fees associated with criminal or regulatory allegations.

D & O insurance is especially important when attempting to attract quality directors and officers into companies that deal with cutting-edge areas of research and development.

General liability insurance can fall short in some instances for directors and officers.

It’s also important for attracting them to:

  • Industries undergoing rapid legislative changes
  • Companies that routinely do business in several states or a global setting
  • Companies with employees where relationships could potentially be considered a conflict of interest

D & O coverage provides some peace of mind for the individual directors or officers.

It also provides a valuable level of additional protection to insulate individuals from personal loss in the event of a claim.

Contrary to popular opinion, D & O insurance does not encourage malfeasance since it excludes deliberate acts of fraud or intentional illegal activity.

Instead, it provides protection required to operate in complex industries without fear of reprisal should an accidental omission, mistake or other oversight take place.

With more than 95% of Fortune 500 companies citing D & O insurance as a core component of corporate insurance, it is no longer considered an “add-on” policy.

In fact, given the number of corporate scandals and an increasingly litigious environment, D & O insurance is increasingly considered to be imperative for companies of any size that plan to:

  • Seek venture capital funding
  • Initial public offering
  • Other investment opportunities that involve shareholders


Research indicates that more than 30% of all companies can expect at least one claim against directors or officers.

Average defense costs of a claim exceed $1 million.