If you’re a founder, director, or even a manager within a business, Directors’ and Officers’ (D&O) insurance keeps you safe when you’re scaling up. At this stage, you’re often making business decisions that, despite being a part of your role, can still take some careful navigating. You make a mistake, the buck stops with you.
So it’s fair to say that D&O insurance is pretty much essential if you want to sleep at night. With it, your business actions are way less exposed to civil, criminal or regulatory threats. Here’s why that’s important.
What is D&O insurance?
While Employers’ Liability insurance protects the company itself, it doesn’t protect you and your other directors personally. D&O, on the other hand, does. It covers you against personal claims or proceedings, which are your responsibility. And the legal action needed to defend yourself could harm your business, both in cost and reputation.
The optimistic amongst you may be thinking “who could possibly want to make a claim against me?” Well, your investors for a start. After funnelling potentially millions into your business, they may blame you personally if anything goes wrong. D&O insurance protects against this by covering things like:
- Data breaches
- Insolvency hearings
- Environmental claims
- Reputational damage
- Health and safety claims
- Regulatory and internal investigations
- Freezing of assets and disqualification
Of course, this is just a small selection. The exact nature of your D&O insurance depends on your responsibilities and what stage of the scale-up journey you’re at.
When do I need it?
In short, whenever you take that step from startup to scale-up – and definitely if you’re bringing on an investor. It’s a sign of security to your financial backers, as well as legitimacy. It may even be a condition of a VC investor that you get the cover in place within 100 days of investment. In effect, you’re proving that you’re safe to handle their money.
If you’ve already secured funding and are about to invest it, you should make sure you have D&O insurance before expanding. After all, imagine you’re about to open new international offices. You drum up local media attention and hire staff only to get hit with a personal claim. That claim could undermine all the effort that went into your expansion – whether that’s a result of reputational damage or defence costs restricting your funding.
To be honest, from the moment you open your business there’s a possibility you could be hit with a claim like this. So, in our view, you should put the appropriate cover in place as soon as you can.
How we can help
Any broker can give you a D&O quote. But very few can advise on what's relevant for a rapidly growing business. Having ourselves jumped from startup to a top 50 UK broker, we’ve got the experience and expertise to enable your ambition.
At Capsule, we see scale-ups as partners, not clients. Drawing from hundreds of data points, we tailor insurance programmes that scale as you do, so you can always be confident that your insurance has kept pace with your growth!
To find out more about D&O insurance and how it can support your next move, get in touch.