At RiskBox, we stand by the view that Directors’ & Officers’ (D&O) Liability – often referred to as Management Liability – is one of the most important insurances you need, as it protects your personal liability for running the business.

The notion that because you’re a limited company your personal liability is also limited is simply untrue – action can be taken against you for any wrongful acts you commit. So we’ve put together a guide to help startup businesses gain a deeper understanding of D&O Liability and what it entails.

When to consider D&O Liability

As a startup, you have to consider costs carefully. Whilst there may be a risk, you might be comfortable with your exposure until you reach a certain point – although if you’re contractually obliged to have this cover (usually by investors), you should take it out ASAP.

If you’re running a high-growth venture or looking at raising funds to fuel your journey, again, we recommend getting cover in place as soon as you can. That’s because it’s a claims-made policy, so you’re usually only covered from when the policy is live, as a retroactive date is often applied.

What insurers want to see

Insurers usually review the risk based on publicly available information, such as your website, but more importantly, the information filed on Companies House. This is to see how financially viable your startup is, what liabilities it has, and whether it’s profitable yet.

But this isn’t always possible for new businesses, therefore insurers usually require more information to review thoroughly. Here’s what you can expect to see requested:

Business plan

This should include the following:

• Overview of your business and activities
• Details of your senior leadership team
• Market and territories
• Financial forecasts

Experience

Because this cover is protecting how the business is run, insurers will want an overview of who’s in the leadership team and what experience they have in this sector, or of managing a business. Often CVs can be requested, but with technology advancing, comprehensive LinkedIn profiles usually do the trick.

Investment

If you’re seeking investment, they’ll want headline information such as:

• Who from
• How much for
• Details of the transaction (i.e. equity being transferred)
• Investor expectations

Financial data

Whilst some of this is likely included within your business plan, insurers require up-to-date management accounts along with a three or five-year forecast. This should include when you’ll hit profitability, along with evidence that you have sufficient capital to meet your liabilities as they fall due.

The cover itself

Cover can vary across insurers, but at RiskBox, we work hard to ensure you have the best protection at the right premium level.

Unless contractually obligated to have a certain limit, you need to carefully consider the options available to ensure suitable protection. Learn more in our five-point guide.

Support from RiskBox

Got a question about D&O Liability, or want a quote for a new policy? Reach out to our friendly team today. You can get in touch by calling 0161 533 0411, emailing info@riskboxuk.com, or completing our online contact form

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