Directors and officers insurance (D&O) is a type of officer’s liability business insurance that protects corporate board members like directors and officers from certain liabilities in the event that someone sues them for wrongful acts conducted in the course of their duties.
D&O insurance shields their assets from seizure and typically protects the company from liability as well. It can protect public companies, private businesses, and even non-profit organizations. In this guide we discuss the average cost of D&O insurance.
How Much Does D&O Insurance Cost? $250 to $10,000/Year
One of the most common questions asked about D&O insurance is how much it costs. The insurance premiums can be paid monthly or yearly but for a clearer figure and easier comparison, let’s go with yearly amounts. Keep in mind that when it comes to insurance of any kind, there are many factors that go into the price which are specific to the circumstances and ensured so these numbers won’t necessarily be representative of the price you’ll pay.
D&O insurance costs can range anywhere from $250 all the way up to $10,000, however, most businesses pay around $600 a year on average. Depending on your companies needs and risks, you may be able to get it for a better price though.
What Influences the Cost of D&O Insurance?
A D&O policy has such a wide price range due to the wide range of factors that go into the policy. The insurance company will assess the risk of the business. The higher the risk, the higher the cost of the D&O coverage. The amount of coverage is also a factor. The averages listed above are for $1 million of D&O coverage. Also, a deductible involved, which means there’s an amount that must be paid out-of-pocket before the insurance pays out. The lower the monthly or yearly premium is, the higher the deductible will be. Bundling D&O with other insurance policies may reduce the cost.
Do I Need D&O Insurance?
It is not just public companies that need D&O insurance. According to one survey, private and non-profit companies are just as likely to deal with D&O claims as public ones are. If your company has a corporate board of directors or employs any kind of advisory committee, then you should also have a D&O policy as well.
Many smaller businesses think that D&O policies are only worth having if you’re a multi-million-dollar company. The truth is that since smaller companies are just as likely to face litigation, they may need D&O coverage just as much or even more than companies with deep pockets. Being smaller doesn’t reduce the risk of claims but it does reduce the odds that the company will be able to afford the cost of such suits.
D&O Insurance vs E&O Insurance?
While D&O insurance and E&O insurance are both kinds of professional liability insurance, there is an important distinction to be made. D&O insurance is strictly for higher up employees while E&O (Errors and Omission) insurance protects all employees irrespective of their level at the company. It is recommended that any company which provides a service should also have E&O coverage. Directors and executives should also look into EPLI insurance.
Where Can I Find D&O Insurance?
While you can consult an insurance company directly to get D&O insurance, you’ll have an easier time comparing rates and getting the best price if you use an agent, broker, or marketplace. For the best results, a marketplace is probably the ideal choice. While agents and brokers work with different insurance companies and can find insurance to fit your needs, a marketplace like CoverWallet gives you access to many insurance policies from a wide variety of companies and allows you to manage them easily too. Instead of finding the best price on each individual policy, possibly with different companies, and trying to keep track of them all separately, CoverWallet allows you to consolidate them all in one place and get expert advice every step of the way.
While it isn’t required that your business purchase D&O insurance, not having it can be a very costly decision. It doesn’t have to cost a fortune either. If you’re with a massive company with a high risk in need of millions in coverage, then it will cost more but also it will be worth it. Smaller companies are more likely to get a lower rate. If you work with a marketplace like CoverWallet they may be able to save you money and simplify the entire process as well.