Businesses face more lawsuits than ever before, and executives can be held personally liable for the decisions they make. One of the best tools businesses can use to protect high-level executives from the costs associated with claims of mismanagement is directors and officers insurance (or D&O insurance for short). This guide will provide everything you need to know about D&O insurance, including what it covers, how much it costs, how to compare policies, and who the best D&O insurance companies are, including our top picks below.
- Embroker offers the best D&O insurance for startups
- The company’s policies are among the most affordable on the market
- Provides tailored insurance packages for customers to choose from
- Liberty Mutual offers the best directors & officers insurance for nonprofit organizations
- The company utilizes broad insurance coverage definitions
- Has highly flexible policy options
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Understanding Directors & Officers Insurance
As a corporate director or officer, you may be held personally liable for wrongful acts committed in the course of your work. To protect yourself and your assets, it’s important to have the right insurance coverage, such as directors and officers insurance. However, many businesses do not know that they need this type of coverage. In fact, a Chubb survey found that 65% of companies were not aware that they needed D&O coverage. D&O policies can vary significantly, so it’s essential to understand what they cover and how they work.
What Is D&O Insurance?
D&O insurance is designed to protect the personal assets of directors and officers in the event they are sued for wrongful acts in the course of their work. This type of insurance can also cover the expenses associated with defending against such lawsuits.
D&O policies can vary significantly, so it’s essential to understand what is and is not covered by your policy. For example, some policies may exclude certain types of claims, such as those arising from environmental contamination or fraud.
Some businesses confuse directors and officers insurance with other forms of commercial insurance, such as errors and omissions insurance (E&O insurance), employment practices liability insurance (EPLI), and fiduciary liability insurance. We explain the differences between D&O insurance and these other common forms of commercial coverage below.
How Does D&O Insurance Work?
D&O insurance policies provide liability coverage for company directors and officers to protect them from claims that are a result of actions they take while on the job. These policies are structurally similar to other forms of commercial insurance: in exchange for a monthly or annual premium, the insurer agrees to cover certain financial losses specified in the policy after a retention (similar to a deductible) is met. The coverage provided by the insurer is capped by limits that can either be at the policy level or specific to certain coverages (i.e. sublimits).
In the event that an officer or director is sued, the party would contact the legal department of their company, who would contact the D&O insurance provider. If the claim is approved, then the provider would cover the defense and any settlement costs, subject to the terms and limits of the policy. With a duty-to-defend policy, the insurer is obligated to defend the insured and direct the defense. With a duty-to-pay policy, the insurer is only responsible for reimbursing the insured for any expenses paid related to the defense and/or settlement.
What Do Directors & Officers Policies Cover?
D&O insurance can help cover the costs associated with defending against a claim, including attorney’s fees, court costs, and any damages that may be awarded. It is important to note that D&O insurance does not cover every type of claim that could be brought against a director or officer. For example, most policies exclude claims arising from fraud or criminal acts, as well as claims covered by other management liability policies like employment practices or fiduciary liability.
Companies typically indemnify their directors and officers in the event of a claim being made against them. Indemnification is where the company reimburses the director or officer for the attorney’s fees, costs, and potential judgments. D&O policies are designed to protect directors and officers when the company fails to indemnify them (side A), reimburse the company when it does indemnify a director or officer in a claim (side B), and protect the company in the event that the company is named in a claim (side C).
Who Is Covered Under a Policy?
Side A Coverage
Side A coverage pays for damages and defense costs for claims made against directors or officers when the company fails to indemnify them, such as in the event of a bankruptcy.
Side B Coverage
D&O Side B Coverage reimburses the organization when it indemnifies the individuals. This type of coverage is important because it protects the company’s balance sheet. Without this type of coverage, the company would be at risk of using excessive amounts of its own capital if a director or officer were sued.
Side C Coverage
Side C is known as entity coverage, which provides protection for the business itself in the event that it is named in a lawsuit. This insurance provides entity asset protections and coverage for legal costs.
Common D&O-Related Risks Covered
A D&O claim will typically arise from one of the following parties: creditors, shareholders, government and regulatory authorities, employees, or competitors. The most common types of claims that a directors and officers insurance policy will protect against include breach of fiduciary duty, mismanagement of company funds, misrepresentation, lack of corporate governance, failure to comply with workplace laws, and intellectual property theft, among other wrongful acts.
What Doesn’t Directors & Officers Insurance Cover?
You need to understand that D&O insurance will not provide coverage for everything. For example, D&O insurance will not provide coverage for dishonesty, fraud, or criminal or malicious acts committed deliberately. Additionally, D&O insurance will not cover lawsuits between directors and officers within the company. So if there is a dispute among your team, you will not be able to rely on D&O insurance to cover the costs. Finally, D&O insurance will not provide coverage for bodily or personal injury of a person or physical damage to a third party’s property. So if there is an accident at your company, D&O insurance will not cover the cost of medical bills or repairs.
What Businesses Need D&O Coverage?
Any organization-including nonprofits-that has a board of directors should consider D&O insurance. Companies of all sizes face D&O litigation risks, and it’s a common misconception that only large publicly traded companies need this type of coverage. In the sections below, we’ll review how directors and officers insurance applies to various types of corporate entities.
Publicly Traded Companies
Publicly traded companies are required to meet a higher standard of governance and must comply with complex securities regulations. Even the most compliant and diligent public companies can feel as though litigation is always lurking, often because it is. Smaller publicly traded companies may not have in-house counsel, leaving them exposed to greater risk. Directors and officers can be held personally liable for damages stemming from wrongful decisions or actions taken on behalf of the company. Because of this, individuals entertaining an executive position at a publicly traded company often require that the company both indemnify them in the event of a claim and also that the company has a D&O policy in place should the indemnification provision fail to provide protection in a particular case.
It’s another popular misconception that only large nonprofit organizations need D&O insurance. In reality, directors and officers of all nonprofits have exposure to personal liability. This is often due to the fact that when compared to officers at larger organizations, directors and officers of smaller nonprofits lack experience and knowledge of regulations. Additionally, not all actions of directors and officers are covered by the federal Volunteer Protection Act.
According to a Towers Watson Directors & Officers (D&O) Liability Survey, 63% of nonprofit organizations reported a D&O claim in the past 10 years. Given these statistics, it’s clear that D&O insurance is a noteworthy consideration for all nonprofits, regardless of size or scope.
D&O insurance provides protection for nonprofit directors and officers in the event that they are sued for wrongful decisions or actions. This type of insurance can help cover the costs of legal defense, settlements, and judgments. D&O insurance can also help protect the personal assets of nonprofit directors and officers.
If you’re not sure whether D&O insurance is right for your nonprofit, consider consulting with an insurance agent or broker. They can help you assess your organization’s risk and determine if D&O insurance is right for you.
Startups & Other Venture-Backed Private Companies
Startups are especially vulnerable to D&O lawsuits. In fact, D&O lawsuits are one of the most common types of litigation against startups. There are several reasons for this. First, startups often have a large number of shareholders. This fact can create conflict and increase the likelihood that someone will file a D&O lawsuit.
Second, startups typically have a smaller board of directors than larger companies. This smaller size means that each director has more responsibility and is more likely to be sued if something goes wrong.
Finally, startups often rely on venture capital funding. This high-pressure environment can pressure directors and officers to meet unrealistic goals, which can lead to D&O lawsuits if the company fails to meet those goals. Additionally, investors typically require D&O coverage as a condition of their investment.
A new startup can also be sued in cases of employee piracy. This occurs when an employee leaves the startup to join another company or start their own. The former employer could sue the new startup for theft of customers, intellectual property, and more.
Despite the increased risk of D&O lawsuits, many startups do not purchase D&O insurance. This is often because startups are cash-strapped, and D&O insurance can be expensive. However, the cost of D&O insurance is generally necessary, given the high cost of D&O litigation. In addition, most investors will require that startups purchase D&O insurance before they invest in the company.
If you’re thinking about whether your startup should purchase D&O insurance, you should speak with an experienced corporate attorney. An attorney can help you understand the risks your startup faces and determine whether D&O insurance is right for your company.
As a small business owner, you may not think that your company is vulnerable to the same kind of lawsuits that larger businesses face. But even small businesses can be sued for illegal practices, and the costs of defending yourself and your company can be significant. Chubb found that more than one in four private companies faced a D&O claim over three years.
D&O insurance can protect you and your company from legal expenses related to claims brought against you for wrongful decisions or actions as a director or officer of your company. D&O coverage can also sometimes provide protection for employees who are accused of wrongful acts while performing their duties on behalf of the company.
While D&O insurance is not required by law, it is generally considered to be a prudent step for any company, even a small privately held business. The costs of D&O insurance will vary depending on the size and type of your business, but it is typically affordable for most small businesses.
So if you’re running a small business, don’t assume that D&O insurance is not something you need to worry about. Talk to your insurance agent or broker about whether D&O coverage makes sense for your business. It could end up being a crucial part of your risk management strategy.
Directors & Officers Insurance Compared to Other Policies
As a business owner or executive, you need to make sure that your company is protected from any potential risks. That’s why it’s crucial to have the right insurance policies in place. D&O insurance is just one type of coverage that you may need for your business. Other types of policies that you should consider include errors and omissions (E&O) insurance, employment practices liability insurance (EPLI), and fiduciary liability insurance.
Each of these policies offers different protections, so it’s necessary to understand the differences between them. A comprehensive business insurance plan could include all four types of coverage. Here’s a closer look at D&O insurance and how it compares to other types of business insurance policies.
D&O vs. E&O Insurance
D&O insurance and E&O insurance are two types of liability coverage that can help protect your business but differ in a few key ways.
D&O insurance is designed to protect directors and officers of a company from personal financial losses in the event that they are sued for wrongful decisions or actions while in their corporate roles. E&O insurance, on the other hand, protects businesses against claims of professional negligence or errors and omissions. This type of coverage is important for businesses that provide goods or services directly to clients. D&O insurance generally covers management decisions, while E&O insurance covers the work performed by a company providing services to another company or individual.
D&O vs. EPLI Insurance
D&O insurance and EPLI insurance are two types of insurance that can help protect your business from different types of risks.
D&O insurance is designed to protect businesses and their officers from claims made against them by customers, clients, shareholders, or other outside parties. D&O policies can cover a variety of risks, including a lack of corporate governance, breach of fiduciary duty, misrepresentation of company assets, or intellectual property theft, among others. However, this type of insurance does not necessarily cover claims made by employees.
EPLI insurance, on the other hand, is designed to protect businesses from claims made by employees. EPLI policies typically cover claims related to wrongful termination, discrimination, sexual harassment, and more. D&O insurance can include EPLI insurance if the extension has been purchased. For example, if an employee sues for sexual harrassment, D&O insurance would cover the claim only if EPLI insurance was also purchased.
D&O vs. Fiduciary Liability Insurance
D&O insurance and fiduciary liability insurance are both important for businesses, but they serve different purposes. D&O insurance is designed to protect directors and officers from risks that come with general management of the company, while fiduciary liability insurance is specifically designed to protect benefit plan administrators-such as administrators of 401k plans-from allegations of improperly managing the plan assets.
The Benefits & Drawbacks of D&O Insurance
There are many benefits and drawbacks to D&O insurance. Understanding these pros and cons can better help you determine the right mix of insurance coverage for your business’s needs.
Attracting Top Talent
The market for quality management is highly competitive. Companies are doing whatever they can to retain talented executives. One way that companies can help ensure they attract the best talent is by providing D&O insurance.
According to Travelers, 70% of directors and officers ask about D&O coverage. Top-tier executives and officers will not even consider joining a company if their personal assets could be put at risk. By offering company principals D&O insurance, you’ll provide them with a strong indication that the company can support them in case problems arise. D&O insurance allows your management team to focus on making the best possible decisions for your company instead of worrying about the risks associated with the role.
While D&O insurance may not be required by law, it is becoming increasingly common for companies to purchase this type of coverage as a way to attract and retain top talent. D&O insurance provides executives and officers with peace of mind knowing that they will be financially protected in the event that they are sued in their corporate role. For companies, D&O insurance can help limit their exposure to liability and safeguard their reputation.
Finding investors is becoming increasingly difficult in an unsteady economy. D&O insurance can help companies and startups convince investors to join their fundraising round. Most startup funding contracts from institutional investors will typically stipulate that a D&O policy needs to be purchased within 90 days of closing the financing. This is because investors want to make sure that the company’s directors and officers are protected from personal financial losses in the event of a lawsuit.
Protection From Bankruptcy
Bankruptcy is often seen as a last resort for organizations in financial distress. It provides them with a degree of relief and protection from creditors and litigation. However, even though the company may be protected from some legal action, its directors and officers may still be at risk. Certain parties may blame the organization’s leadership and their decisions for the bankruptcy and demand that they repay the company’s debts and obligations personally. An excellent D&O policy during bankruptcy would provide the executives and directors with protection.
Cybersecurity breaches can have a devastating effect on businesses, both in terms of the damage caused and the reputational fallout. In such cases, it’s not uncommon for those affected-customers, investors, etc.-to look to the business management for answers.
These breaches can create a complex situation, as it may not always be clear who is ultimately responsible for the breach and its aftermath. If it is believed that management did not do everything in their power to reduce cyber risks and safeguard systems, then directors and officers can be held personally liable for damages incurred. In this case, D&O insurance can provide financial protection for the officers.
While D&O insurance cannot prevent a cybersecurity breach, it can help mitigate personal financial exposure for corporate officers in the event that one occurs. This would ideally be used alongside a dedicated cyber liability policy, which would assist in handling the breach itself.
Gaps in Coverage
As a company grows, it is essential to have the right insurance in place to protect the business and its employees. D&O insurance is one type of insurance that is designed to protect executive and board team members. However, there are some key management team members who may not qualify as “officers” of the company, and thus they will not be eligible for insurance under the policy. This could be a drawback for some companies.
There are a few reasons why some key management team members may not be covered by D&O insurance. One reason is that they may not meet the definition of an “executive officer” as defined in the policy. Another reason is that they may not be listed as officers in the company’s corporate filings.
If a key management team member is not covered by D&O insurance, they may be at risk if they are sued in their individual capacity. This liability could lead to personal financial damages if they are held liable for any wrongful acts.
Insufficient Side A Coverage
While many companies already purchase Side A coverage as part of their D&O packages, they often share limits with Side B and Side C coverage for claims against the company, which means that Side A coverage can be quickly exhausted. Companies should consider purchasing dedicated Side A coverage that sits above the traditional ABC combined coverage limit.
Directors & Officers Insurance Costs
Like most corporate insurance products, the cost of D&O insurance depends most on coverage limits, but there are a number of other factors that weigh in. Below, we will review these in more detail, as well as average policy costs.
How Much Does D&O Insurance Cost?
The annual premium for $1 million in D&O coverage is typically between $5,000 and $10,000 per year. However, the cost of D&O insurance depends on several factors, including the size of your company, the industry you operate in, and the amount of D&O coverage you need. D&O insurance is typically more expensive for larger companies and for companies that operate in highly regulated industries. Consider the following cost drivers when shopping for D&O insurance.
Factors That Affect D&O Premiums
Age of the Business
Company age is a significant cost driver for D&O insurance. Younger companies tend to have less experience and a shorter track record of effective risk management. Typically, older and more developed businesses have experienced directors and officers, and thus, pose less risk than newer companies.
This fact doesn’t mean that younger companies are automatically high-risk and expensive to insure. Every company is different, and D&O insurance rates are based on a variety of factors, including the size of the company, the industry it operates in, and its claim history. However, all else being equal, a startup is likely to pay more for the same amount of D&O insurance coverage than a more mature company.
When it comes to D&O insurance, one of the critical underwriting considerations is financial stability. That’s because brokers want to see companies that are growing steadily and managing their debt effectively.
Companies that have strong financials and are operating in industries with positive economic outlooks will typically enjoy lower premiums. On the other hand, those with weak financials or gloomy economic prospects will see their rates increase.
So if you’re looking to keep your D&O insurance costs down, it’s essential to maintain a healthy balance sheet and avoid taking on too much debt. Doing so will give you a better chance of weathering any storms that come your way and keeping your premiums low.
The price of D&O insurance is greatly impacted by the size of the company. Company size can be determined in multiple ways. D&O insurance providers could determine company size by annual revenue, the total amount of funding, number of employees, number of paying customers, and more. Larger companies tend to pay more for D&O insurance simply because as the number of parties it does business with increases, the chance of a liability claim also goes up.
The industry your company operates in can have a significant influence on D&O insurance costs. For example, the investment banking and securities industry exposes company leaders to many risks. This sector is known for vulnerabilities that can lead to increased D&O insurance costs.
Other industries might not have the same level of risk, but they can still present challenges that insurers take into account when setting rates. It’s essential to understand how D&O insurance works in your industry and what factors influence the cost so you can make informed decisions about coverage for your company. Here are a few examples of how industry can affect directors and officers insurance policies:
- Investment banking and securities: This sector is frequently exposed to many risks, which insurers are well aware of. As a result, D&O insurance rates for companies in this industry are often higher than for other sectors.
- Technology industry: The fast-paced nature of the technology industry can lead to increased D&O exposure for company leaders. This exposure can result in higher D&O insurance rates for tech companies.
- Pharmaceutical industry: The pharmaceutical industry is subject to stringent regulation and slow product development times, which can lead to increased D&O exposures for company leaders. These facts can result in higher D&O insurance rates for pharma companies.
- Manufacturing industry: The manufacturing industry is often exposed to product liability risks, which can lead to increased D&O exposure for company leaders. This exposure can result in higher D&O insurance rates for manufacturing companies.
- Retail industry: The retail industry is typically not as risky as other industries, which can result in lower D&O insurance rates for retail companies. However, the retail industry is constantly changing and evolving, which could lead to increased D&O exposure in the future.
One of the most important factors to consider when deciding which D&O policy to purchase is the terms and conditions of the policy itself. D&O insurance policies are not standardized, so it’s necessary to pay close attention to the fine print. Some terms and conditions are negotiable, while others are not. Some key things to look for in a D&O policy include:
- Coverage limits: How much coverage does the policy provide?
- Policy retention: What is the size of the policy retention/deductible?
- Policy limits: What are the policy limits?
- Claims made vs. occurrence: Does the policy cover claims that are made during the policy period, or claims that occur during the policy period?
- Prior acts: Does the policy cover acts that occurred before the policy period?
- Extended reporting period (ERP): Does the policy have an extended reporting period? If so, how long is it?
In general, the more protection a policy provides, the more expensive it will be.
Determining the Right D&O Coverage Amounts
There is no foolproof way to determine the ‘perfect’ amount of D&O insurance to purchase. However, there are a few key factors that executives should keep in mind when trying to determine the appropriate coverage amounts.
First and foremost, D&O insurance should be used to protect the company’s assets. This means that coverage limits should never be less than the value of the company’s assets. Purchasing D&O insurance with inadequate coverage limits could potentially destroy the company’s finances if a claim were to arise.
In addition to protecting the company’s assets, companies also need to consider what they can afford in annual premiums. D&O insurance premiums can be expensive, so it’s important to make sure that the coverage amount is something that the insured can actually afford to pay.
Finally, directors and officers should also take claim and benchmarking studies into consideration when determining the right D&O coverage amount. By looking at past claims data on similar types of companies, executives can get a better idea of how much coverage they need to protect themselves from potential future liabilities.
How to Layer D&O Insurance Coverage
Companies that need more extensive programs with limits over $30 million may have to layer D&O insurance. This level of risk is typically too high for one insurer. When companies layer D&O insurance, they have D&O insurance from several insurers that cover specific amounts in successive layers.
Typically, there is a lead insurer that manages the structure and carries the first layer of insurance up to a certain amount. Once that amount is exhausted, the next insurer would cover up to a certain amount and so on. There are other structures that companies can utilize, such as proportional coinsurance, where insurers split the premium proportionally.
There is no perfect answer for layering D&O insurance providers, and it depends on the needs of the specific company. For larger companies, it may be necessary to have multiple insurers with larger limits of liability. This insurance structure can minimize gap issues, resolve coverage issues more efficiently, and provide other benefits.
Ultimately, the degree of mutual loyalty, trust, and commitment between the business and insurance provider will help determine the preferred D&O insurance program structure.
Finding the Best Directors & Officers Insurance Providers
This insurance category has evolved over time to provide improvements, address issues, economic changes, and help policyholders. However, finding the best insurance provider to work with can be a difficult task, especially as the number of insurers has grown rapidly in recent years. In the section below, we identify the key factors to consider when comparing D&O insurance carriers, including coverage options, policy limits, claims handling, defense, company reputation, and financial strength.
How to Compare D&O Insurers
1. Coverage Options & Limits
First and foremost, it’s essential to understand that D&O policies are not standardized, so the coverage and limits can vary significantly from one insurer to the next. That being said, some key coverage options that you might find with D&O insurers include Side A, Side B, and Side C coverage.
As for limits, this is where things can be more complicated. Depending on the policy, D&O insurers might have different per-person and per-claim limits. Make sure to carefully review the policy details to ensure adequate coverage limits for your needs.
2. Claims Handling & Defense
Different D&O insurers handle claims in different ways. Duty-to-defend policies require that the insurer direct the defense; whereas, duty-to-pay policies only require that the insurer reimburses the insured for defense costs. In general, duty-to-defend policies are preferred by smaller companies that don’t have the capacity to defend a claim on their own. On the other hand, larger organizations might prefer duty-to-pay policies so that they can lead their own defense.
In addition to how the defense is handled, there are also differences across policies with regards to which claims are covered. Some D&O policies are written on a “claims-made” basis, which means that the policy will only cover claims that are made during the policy period. Other D&O policies have a “continuous coverage” basis, which means that the policy will cover any claim that arises from events that took place during the policy period, even if the claim is not made until after the policy period has ended.
3. Company Reputation
When it comes to D&O insurance, you want an insurer with a good reputation. You need a company that will deliver great customer service and cover your directors and officers when you need it most. A company’s reputation can help you make a decision about D&O insurance. The Better Business Bureau and J.D. Power are two resources that can help you find more information about an insurer’s reputation with its customers.
4. Financial Strength
You need to be sure that your insurer has the financial resources when an issue arises. One way to determine the financial strength of a company is to consider its ratings from A.M. Best, Moody’s, and Standard & Poor’s. These ratings indicate whether the company has the necessary capital to cover its obligations should claims arise.
Best Directors & Officers Insurance Companies Overall
Travelers (Best Overall D&O Insurance Policy)
Travelers is one of the largest commercial insurers in the U.S., offering an excellent suite of risk management products including directors and officers insurance.
- Travelers provides a comprehensive set of management liability products tailored to a wide range of use cases
- Excellent financial strength ratings and customer satisfaction
- Coverage varies by state; limited online resources for potential customers
Founded in 1953, Travelers has grown to more than 30,000 employees and 13,500 independent contractors spanning the Americas and Europe. Unlike many of its competitors, Travelers sells its policies though a large network of independent insurance agents-a model that many customers prefer. The advantage for customers is that these independent agents are not strictly limited to selling Travelers policies, and can help businesses compare them alongside those offered by other insurance carriers. Working directly with an independent agent also creates more room for policy customization and/or laying multiple policies.
For business customers, Travelers offers a wide range of products to cover the most common corporate risks. Its directors and officers policies fall under its broader management and professional liability umbrella, which includes cyber insurance, EPLI, E&O insurance, and crime insurance, among others. Travelers offers various D&O policies that are tailored to different types of organizations, including nonprofits, public companies, asset management firms, and financial institutions. Its D&O policies utilize a broad definition of claim and extend coverage to the spouses, domestic partners, and estates of executives as well.
While most Travelers customers enjoy working with its network of independent agents, the process of getting a quote and ultimately securing a policy can be more time consuming than doing so online through a company like Embroker or Founder Shield. Many newer insurance technology companies offer fully online experiences, which small businesses with less complex needs often prefer. This is probably the biggest downside to Travelers, whose website offers fairly limited functionality for comparing policies and quotes.
When it comes to reputation, Travelers is one of the most well-regarded insurers in the industry. After nearly 160 years in business, Travelers holds an A rating with the Better Business Bureau, and recently scored highly on J.D. Power’s Small Commercial Insurance Study. Additionally, Travelers has earned the highest score available from A.M. Best (A++), as well as an AA from S&P and an Aa2 from Moody’s, both of which are near the top of their respective rating scales.
A combination of strong D&O policy offerings for a variety of business types, positive customer feedback, and excellent financial strength make Travelers our pick as offering one of the Best D&O Insurance Policies Overall.
Embroker (Best for Startups; Most Affordable)
Embroker’s mission is to make it radically simple to get the right business insurance at the best price. It’s D&O policies are part of a larger suite of excellent commercial policies available online.
- Embroker was the first company to offer a D&O policy directly online
- Bundled packages tailored to different business types, including startups and growth-stage companies
- Its risk assessment technology and digital business model allow Embroker to deliver more affordable policies than its competitors
- Embroker policies are not as customizable as those offered by larger, traditional insurers like Chubb or Travelers
Embroker stands out from the other insurers in this guide as the only digitally-native business, offering quotes and policies to customers in a matter of minutes. This model makes it easy for small businesses to obtain D&O coverage without having to work with an agent. Additionally, by automating large portions of the underwriting process, Embroker is able to offer policies that are significantly cheaper than competing providers.
Directors and officers insurance is one of four policies that Embroker includes in its “Startup Package.” Other policies in this package include employment practices liability, errors and omissions, and fiduciary liability insurance. Embroker’s D&O policy includes the standard ABC coverage options, alongside the option of having a duty-to-defend provision. This means that startups and small businesses that choose Embroker can offload legal defense to the carrier.
For growth-stage companies with greater coverage needs, Embroker offers a number of endorsements (or enhancements), including extended reporting windows, coverage extension to spouses and domestic partners, and broad coverage definitions, among others. That said, one downside to Embroker’s digital model is that when compared to traditional carriers, Embroker doesn’t offer the same types of policy customizations that are often required for larger businesses. While Embroker does offer a lot of flexibility in its policies for small- to medium-sized businesses, large enterprises with complex insurance needs will likely be better suited elsewhere.
Customers that ultimately choose to work with Embroker tend to be highly satisfied with the insurer. Embroker boasts a Net Promoter Score of over 70, which they claim to be the highest rating of any commercial insurance company on the market. On the financial side, Embroker policies are reinsured by a coalition of top-rated insurers, including Munich Re who has an A+ rating with A.M. Best.
As an industry-leading digital insurance platform responsible for bringing the first 100% online D&O policy to market, Embroker is an excellent choice for startups or other businesses looking for affordable and convenient commercial policies. For these reasons, we pick Embroker as having the Most Affordable D&O Policies and the Best D&O Insurance for Startups.
Liberty Mutual (Best for Nonprofits)
Liberty Mutual has a long history of providing D&O insurance solutions to nonprofits of all sizes. They understand the unique needs of these organizations and have the specialized skills and experience to provide excellent coverage.
- Flexible coverage options
- Broad insurance coverage definitions
- D&O insurance policies are underwritten by a subsidiary
Nonprofits have unique D&O risks arising from their status as tax-exempt organizations. For example, donors to a nonprofit may sue its directors and officers if they feel that their donations were not used properly. Similarly, government regulators may bring suit against a nonprofit’s officers if they believe that the organization has violated its charitable mission.
As a nonprofit organization, you may face many different types of lawsuits. D&O insurance from Liberty Mutual can help protect your business and its leaders against these costly legal actions. The insurer offers flexible coverage options with limits of up to $25M for private and not-for-profit organizations. Customers benefit from dedicated claims specialists, the ability to settle claims quickly, and access to risk-management services.
Another benefit is that Liberty Mutual’s D&O insurance offers broad definitions of insureds, employees, wrongful acts, and claim types. These broad definitions help keep organizations protected from a range of D&O liability issues. One downside, however, is that Liberty Mutual does not offer D&O insurance directly. Rather, policies are written by a subsidiary, Ironshore.
For nonprofit organizations looking for the best D&O insurance coverage, Liberty Mutual is an excellent choice. With policies specifically designed for nonprofits and their unique risks, Liberty Mutual offers excellent protection at an affordable price.
Chubb (Best for Public Companies)
Chubb is America’s largest commercial insurer. Its D&O policies are an excellent choice for public companies and other organizations with complex needs.
- Chubb offers an industry-leading D&O policy tailored specifically for publicly-traded companies
- Excellent customer service and superior financial strength
- Chubb’s more expensive policies are not ideal for smaller organizations
Chubb offers two separate D&O policies for public companies: 1) Chubb Primary Directors and Officers and Entity Liability Insurance, and 2) CODA Premier Directors and Officers Liability Excess DIC Policy. The former is Chubb’s standard D&O policy that has some notable advantages over those offered by competing insurers. For one, Chubb provides customers with at least 180 days to report claims, compared to the 60-day industry standard. It also allows its customers to settle claims within the retention without Chubb’s permission. For customers with more complex needs, Chubb offers a wide range of coverage additions such as extended reporting and advanced payment of defense costs.
Chubb’s CODA Premier policy, which is available to both public and private companies, provides up to $25 million in broad difference-in-conditions (DIC) coverage in the event that a customer’s underlying insurer fails to cover a claim. Its broad definitions of insureds, losses, and claims covers the most common risks a business might face, and coverage cannot be canceled for any reason other than non-payment.
One of the most notable downsides of Chubb policies is that they are typically pricier than those offered by competing carriers. But most customers are willing to pay more for the level of coverage and service that has come to define Chubb. J.D. Power’s most recent customer satisfaction study gave Chubb an 838 out of 1,000, the highest score of the companies evaluated in this guide. Additionally, many of Chubb’s independent agents and brokers are some of the top-rated firms in their respective markets.
When it comes to financial strength, Chubb has more than $200 billion in assets and wrote nearly $50 billion in premiums last year. The company boasts excellent marks from the three major rating agencies. It earned A.M. Best’s top rating (A++), Standard & Poor’s third highest rating (AA), and Moody’s fourth highest (Aa3).
As the largest property and casualty insurer in the world, Chubb has a deep understanding of the risk management needs of public companies. Its excellent customer service, tailored policy offerings, and superior financials make Chubb our pick as having the Best D&O Insurance for Public Companies.
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