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Directors and officers insurance

Directors and officers insurance

Directors and officers (D&O) insurance is a special type of insurance designed to protect individuals who serve as directors or officers of a company. If legal action is taken against them due to their managerial decisions, this insurance helps cover the legal costs and other related expenses.

Why is directors and officers insurance important?

D&O insurance is essential because it protects the personal assets of the directors and officers. Without this insurance, legal actions could be financially devastating for individuals who might be held personally responsible for decisions made on behalf of the company. This protection encourages competent individuals to take up these roles without fearing personal financial loss.

It’s crucial to have directors and officers coverage if your business:

  • Faces legal risks
  • Has external investors
  • Operates internationally
  • Is publicly traded

What does directors and officers insurance cover?

Legal Defense Cost

D&O insurance helps pay for legal defense costs, including lawyer's fees, court costs, and other related legal expenses. This ensures that the director or officer doesn’t have to bear these costs alone.

Settlements and Judgments

Sometimes legal actions result in settlements or judgments that must be paid. D&O insurance can cover these expenses, protecting the personal assets of the individuals involved.

Breaches of Statutory Acts by Directors or Officers

Directors or officers can sometimes unknowingly breach statutory acts which can result in hefty penalties and fines. These may include breaches related to commerce Act, companies Act, consumer guarantees Act or other Act. D&O insurance provides coverage for these kinds of situations, preventing the financial burden from falling solely on the individuals involved.

How much does directors and officers insurance cost in NZ?

Directors and officers premiums are calculated on several different factors including:

  • Size of company
  • Industry 
  • Number of directors & officers
  • Level of cover

Directors and officers insurance in NZ typically costs between $50 to $100 per month. 

Who needs directors and officers insurance NZ?

Directors and officers insurance is suitable for:

  • Large publicly-traded corporations
  • Small and medium-sized enterprises
  • Non-profit organizations
  • Start-ups
  • Any organization with a board of directors

In some cases, if a director or officer is found guilty of criminal or fraudulent conduct, the insurance may not cover the associated costs.

Usually, D&O insurance covers all directors and officers of a company, but it’s wise to verify the specific coverage details with your insurance broker.

How do I get proof of directors and officers insurance?

You can usually get proof of insurance same day when you purchase business directors and officers insurance through Gerrards.

Acquiring directors and officers insurance from traditional insurance brokers may require a few weeks, a delay that could create problems for policyholders who need instant insurance proof of directors and officers insurance for a contract. 

To obtain insurance coverage promptly, contact us. We may require you to provide some fundamental details about your business, such as:

  • The name of your business
  • Your financial statements
  • The industry you operate in 
  • Organization structure
  • Number of directors or officers

What does directors and officers insurance not cover?

There are certain key areas where directors and officers insurance may not provide coverage:

Fraudulent Acts

Deliberate fraud or dishonest acts are usually not covered.

Illegal Profits

Profits gained through illegal means are not covered.

Personal Profits

Any personal profits unrelated to company business are not covered.

Contractual Liabilities

Liabilities arising from specific contracts may not be covered.

Contractual Liabilities

D&O insurance does not cover claims related to physical injury or property damage.

Other common questions about loss of directors and officers insurance NZ

Yes, Entity Coverage can be added to protect the organization itself, not just individual directors and officers.

These refer to different levels of protection. Side A covers individual directors, Side B reimburses the company for indemnifying those individuals, and Side C covers the company itself.

Yes, D&O policies can be tailored to suit specific needs, risks, and requirements of the business.

A claim is typically filed by shareholders, employees, competitors, regulators, or other third parties, and the insurance will cover the legal costs of defending against the claim, and settlements or judgments if applicable.

It’s essential to report as soon as possible, as delays can lead to complications and possibly a denial of the claim.

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