Executive Liability Insurance 101

For business owners and administrators in Sante Fe, executive liability is a genuine concern. There are many risks involved in managing a business, any of which could disrupt operations and even threaten the company’s future. It is essential to protect the upper management and executive staff from these occurrences. This is where executive liability insurance comes in.

Executive liability insurance defined

Executive or management liability insurance provides coverage for company executives, management staff, and the company itself. Among the personnel that these insurance plans cover are:

• Officers
• Directors
• Board members
• Managers
• Administrators

Executive liability insurance is aimed at protecting the abovementioned personnel from mismanagement lawsuits. This type of insurance provides more liability coverage than standard general liability policies.

Unlike other forms of insurance, executive liability isn’t a rigidly defined set of coverages. Instead, they usually consist of customized policies, all of which are intended to protect a company’s executives and management team. Most insurance firms offer hybrid plans that are better suited to the needs of smaller companies.

Why is executive liability insurance so important?

Running and managing businesses entails considerable risks from an operational standpoint. Numerous factors can result in liability claims, including alleged employee discrimination, benefit plan mismanagement, and investor fraud. Given the possibility of these occurrences, businesses face a considerable risk of lawsuits that may lead to financial losses and the company’s closure.

Larger companies generally have access to considerable financial resources and expert legal advisors, which helps reduce the risk of liability. They could also afford to obtain different standalone policies that protect them from the legal risks that most businesses face.

Smaller companies generally do not have access to those resources. For these firms, investing in several different insurance policies is far too costly and often unnecessary. A more feasible alternative is to obtain executive liability insurance.

Coverage of executive liability insurance

What does executive liability cover? Because they tend to vary depending on the company’s needs in question, there is no standardized set of coverages that apply to all management liability policies. However, most plans cover the following:

Directors and Officers (D&O) liability insurance. This covers company officers and directors from legal defense costs and potential liabilities resulting from errors, improper conduct, direct action, or negligence.

Employment practices liability insurance (EPLI). This protects businesses from employee lawsuits resulting from alleged wrongful treatment. It covers cases of harassment, discrimination, and other issues related to employment. Apart from directors, managers, and officers, EPLI also covers employees and former employees.

Fiduciary liability insurance. This protects the businesses and company assets against claims related to the mismanagement of the firm’s benefits plan. It also covers company employees tasked with fiduciary duties.

Commercial crime insurance. This protects the company’s property from losses resulting from fraudulent actions by employees or third parties. Covered incidents include theft, forgery, burglary, and fraud. Among the assets covered are company property, cash, merchandise, and securities.

Kidnap and ransom insurance (K&R). This protects businesses from potential financial losses resulting from kidnapping, ransom, and extortion. This type of insurance is essential for companies that regularly send personnel to places with a high risk of the above mentioned crimes.

When is executive liability insurance necessary?

This insurance is essential for smaller companies that may not have the financial capability to obtain individual liability coverage insurance. Smaller firms aren’t subject to as many claims as larger companies, so a hybrid solution such as an executive liability insurance policy makes more sense from a cost perspective.

Executive liability provides a higher degree of protection as compared to standalone policies. The blend of different coverages helps compensate for the gaps between standard policies and provides broader protection.

Executive liability insurance is also a much better option for companies that need better subsidiary coverage and more extensive protection against employment practices. These types of insurance packages are also essential for firms that require additional coverage for employees and contractors.

Conclusion

Executive liability provides businesses with the convenience of a single insurance vehicle that covers company executives, management personnel, and even staff and contractors. They can be customized extensively to fill in gaps in existing insurance policies.

Executive liability is ideally suited for smaller firms that may not be able to afford individual insurance policies. Given their flexibility and broader coverage, they can help companies save a considerable amount in premium costs while still providing the liability protection they need. 

About Daniels Insurance, Inc.

At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.