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Should I get directors’ and officers’ insurance?

08/05/2013

Man happy after discovering he doesn't need directors' and officers' insurance

We're not going to beat about the bush here.

If you're a business owner or boss asking youtrself 'Should I get directors' and officers' insurance?', the answer is 'no'.

Don't believe us? The guy in that picture doesn't have it and look how happy he is.

5 reasons you don't need directors' and officers' insurance:

Here's the low-down on why you don't need it.

1.  You're a small business

Because small companies don't make big mistakes, right?

And even if they do, there's no point suing the directors because ... um ... well, they probably don't have much money. No, it's the big company bosses – they're the ones to go after.

Except, really, that doesn't apply. If something goes wrong, small businesses are as liable as any other. And if anything, the directors are an easier target because they're easier to get to.

So, actually, company size is pretty much irrelevant.

OK, forget this one. Let's move on.

2. You have a limited company

Limited liability: that's the point of a limited company isn't it?

If you get into financial trouble, your liability is limited to the extent of your shareholding (probably a £1 share). Your company's creditors can't touch your personal assets. You're safe!

Oh, hang on a minute. Just because your company has limited liability it doesn't mean you do too. That's right, isn't it?

Yes, yes it is. In fact, your liability as a director is potentially unlimited. If you're sued for negligence, your legal bill will have three, four, maybe five noughts on the end. And then there's the compensation bill.

Right. Better rethink this one.

3. Your company will look after you

Yes, of course it will. Why wouldn't it?

You're a valuable, integral member of the management team. If you get into trouble, it stands to reason your company will defend you. No one gets left behind and all that.

That's assuming there's enough money of course. Maintaining a steady cash flow is hard enough without an expensive court case soaking up resources. And if the cash runs out, or there isn't any to start with, guess who's left holding the bill ...

Hmm. Not quite a bottomless pit after all.

OK, whatever, doesn't matter. There are better reasons than this one.

4. You don't work for that company anymore

The great thing about moving on is that you can't be touched. You're free. It's a new start and the world's your business oyster.

No matter that towards the end it was going from bad to worse, eh? At least you're out of there now.

Wait a minute. Isn't there a 'past liability' thing with directors?

Oh yes. Apparently you're still responsible for the decisions you've made in the past. That's right, even now.

It seems you can be sued for your actions years after actually doing what you did. The bad news about that is that you can bet your previous employer won't stump up to defend you.

That means dipping into your own pocket. Again.

Not doing very well here are we? Nevermind, because this next one's the clincher.

5. You can't afford it

Too right you can't!

Especially not on top of all that other 'essential' business insurance you've shelled out for. Professional indemnity, public liability, employers' liability AND cover for your office too. Don't they know times are hard?

It's not like every small business can afford a whopping £73 or so a year to protect the people who run it, is it?

Just a sec. You can get D&O from £77? A year's supply of tea and biscuits costs more than that ...

OK that's it. We give up. Clearly nothing we can say will convince you not to have D&O insurance.

So if you simply MUST buy it, click here for a quote or call us on 0345 222 5391.

We'll try not to put you off.

Image used under license from Shutterstock.

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