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DEFINITION of 'Directors And Officers Liability Insurance'

DEFINITION OF ‘DIRECTORS AND OFFICERS LIABILITY INSURANCE’

Directors and officers (D&0) liability insurance is insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization (see Build A Wall Around Your Assets). It can also cover the legal fees and other costs the organization may incur as a result of such a suit.

INVESTOPEDIA EXPLAINS ‘DIRECTORS AND OFFICERS LIABILITY INSURANCE’

Anyone who serves as a director or an officer of a for-profit business or nonprofit organization may be at risk of a personal claim as a result of that position. A directors and officers liability policy insures them against personal losses. It can also help reimburse the business or nonprofit for the legal fees or other costs it may incur in defending those individuals against a lawsuit.

D&O policies can take different forms, depending on the nature of the organization and the risks it faces, so it’s best to seek out an insurance company with deep experience in this specialized field. The policies are generally purchased by the organization to cover a group of individuals rather than by the individuals themselves.

Policies can be written to insure against a variety of hazards, but they generally make exclusions for fraud or other criminal activity. For more information, see Don't Get Sued: 5 Tips To Protect Your Small Business.

BREAKING DOWN 'Directors And Officers Liability Insurance'

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