Common Misconceptions About Directors Insurance

Directors insurance safeguards members of boards of directors from legal problems related to things including:

  • Misappropriation of organizational funds
  • Crimes
  • Employee accusations
  • Mismanagement of duties

There are several pervasive myths about this type of insurance, and they sometimes make people delay taking out policies.

It’s Only Necessary for Publicly Traded Companies

Although a director associated with a privately held company or non-profit organization does not face risks from securities class action lawsuits, his or her personal assets can be compromised due to a lawsuit that’s too costly for the organization to bear. Therefore, all directors should consider getting insured.

General Business Insurance is Sufficient

Some people think directors insurance isn’t essential because they already have general business insurance. You’ll need to check your policy to be sure, but that sort of insurance doesn’t usually protect against litigation instances where directors are targeted.

The Organization Isn’t Large Enough to Need It

Occasionally, directors or their respective organizations resist getting this kind of insurance because they think it’s only for bigger groups. However, a board of directors can lead businesses that just have a few employees. There’s also a chance litigation could be brought against a director by a single vendor or customer.

In short, directors insurance helps you be prepared for the future, just in case. Otherwise, your organization’s decision makers may find themselves in costly and career damaging circumstances with little or no support.