Insuring the Directors and Officers of a Private Company

The directors and officers for private companies face unique insurance challenges. They’re in the same position as the directors and officers of public companies insofar as the need for directors and officers insurance, but the bylaws of the company are unlikely to provide for payment for those policies by the company. Nonetheless, the policies are needed.

Directors and officers risk their livelihoods when they make business decisions. Any slight miscalculation or bad gamble could result in losses for the company for which the directors and officers might be liable. A good directors and officers insurance policy can protect the individuals against personal loss as a result of those business losses.

Directors and officers in many industries benefit from directors and officers policies, and those in industries that are primarily populated by private companies should take care to check into their own company’s policies to ensure that they’re adequately covered. Some industries that are primarily privately-owned business include agriculture, automotive, consultants and contractors, entertainment and media, hospitality, legal, manufacturing, distribution, retail and wholesale, restaurants and healthcare. Those and many more are excellent candidates for private company directors and officers insurance. The usual requirement for a policy are annual revenue of $500,000, so most mid-sized business officers will qualify. Generally a policy will carry a limit of up to $10,000,000, but of course a qualified insurance agent should be consulted to determine the extent of coverage that is required.