D&O insurance reimburses the defense costs incurred by board members, managers, and employees in defending against claims made by shareholders or third parties for alleged wrongdoing. D&O insurance also covers monetary damages, settlements, and awards resulting from such claims. If the company cannot indemnify its directors, officers, or employees for amounts resulting from these claims, D&O insurance will step in to directly pay those costs – protecting the individual’s personal assets. If the company indemnifies the individual for such costs, D&O insurance will reimburse the company for such indemnity. The D&O policy will also provide some coverage for the company itself if it is sued.

Coverage is usually for current, future, and past directors and officers of a company and its subsidiaries. D&O insurance covers the individual for acts performed or omitted while in that position with the company. This means that even if the individual is no longer a board member, if a claim is made during the policy period against them for alleged wrongdoing as a board member, they will still be covered under the policy in force while the claim is made. D&O insurance policies do not cover deliberately fraudulent or criminal actions.