Nowadays, large and small companies alike face an increased risk of litigation against individual directors and officers. If you find yourself in this unfortunate situation and you do not have directors liability insurance, then your business could struggle financially in order to cover legal costs. If you are trying to cut back on costs and only buy insurance coverage that is absolutely necessary, here are a few ways to determine whether you need to insure your directors and officers.
Your Current Insurance Coverage Is Inadequate
Some business owners mistakenly assume that their general liability insurance covers claims against individual directors and officers. However, this is not typically the case. If your current insurance coverage does not specifically cover management liability lawsuits, then you need to purchase separate directors liability insurance coverage.
Your Business Cannot Afford a Lawsuit
Most businesses cannot afford to cover the costs of a lawsuit without some financial help. Whether your business is large or small, you need to have adequate coverage for potential lawsuits against management.
If You Have Customers or Employees
Your business could potentially be sued by customers, employees, investors, and competitors, which is why it is imperative to have directors liability insurance if you deal with any of these various groups of people.
If you want to minimize financial losses, it is always best to prepare for the worst with insurance coverage that will cover lawsuits against your management.