What is Executive Liability Insurance?
In today’s developing professional environments, businesses of all sizes need a mitigation strategy that can protect management from unexpected liabilities and exposures. That’s where executive liability insurance and management liability coverage come in.
If you’re learning about this topic for the first time, continue reading to better understand executive liability coverage and how to find the best insurance partner for your business.
Executive Liability Insurance 101: Why It’s Important
So, why is executive liability insurance so important? A recent study showed that 90% of businesses encounter a legal suit eventually. It’s also not uncommon for a small business earning $1 million a year to pay $20k in legal fees annually.
Executive liability insurance aims to provide a safety net that may offer monetary reimbursement in the event of a lawsuit or settlement involving your top directors and/or management team. Liability examples might include:
- Alleged employee discrimination
- Losses due to executive mismanagement or theft
- Criminal acts committed by leadership while on the job
- Fiduciary liabilities
- And other acts of bad faith or employee malpractice
With the right insurance partner, you can access a policy that may make the difference in preventing significant losses. It’s also a powerful tool for attracting and retaining top talent because it communicates your willingness to add another layer of asset protection.
If you still need to get a policy or wish to learn more, we invite you to schedule a consultation to discover how we can elevate your benefits.
Who Should Get Executive Liability Insurance?
Companies tailor executive liability insurance policies like ours to their business size and individual needs. However, plans like this are particularly vital for smaller and mid-sized businesses or nonprofits that can’t afford to risk any financial loss. We also encourage large corporations to add a policy for added protection.
Therefore, we recommend businesses and nonprofits of any size consult with a broker specializing in executive liability coverage to individualize a plan.
Types of Liability Coverage
Given the variance in coverage, it’s important to note the foundational elements of executive liability insurance. But before we go any further, keep in mind that most providers design each part of a plan to potentially mitigate losses across different claim types, the personnel involved, and legal defenses.
That also means many insurance companies may offer full coverage or individual offerings related to claims involving wrongful acts by high-ranking employees and directors. Regardless, understanding this policy’s core tenets answers why executive liability insurance is so important.
The three types of policies outlined below are purchased as separate lines of coverage. Meaning, they are not all bundled under executive liability insurance. Be sure to speak with your insurance company to determine the best types of policies for your needs.
Directors and Officers (D&O) Liability Insurance
The D&O part of an insurance policy may offer coverage to executives accused of mismanagement, negligence, fiduciary malpractice, and other breaches. The objective here is to safeguard their assets while extending financial support for legal defense costs, settlements, or judgments stemming from such claims.
Employment Practices Liability Insurance (EPLI)
Think of the EPLI as a shield that may protect a company and its executives from financial hardships due to legal expenses and damages by a current or former employee. Examples may include accusations of employee discrimination, harassment, wrongful termination, and other alleged employment malpractices.
Fiduciary Liability Insurance
This coverage may offer a business financial protection against allegations of mismanagement, improper investment decisions, or other fiduciary breaches. A goal of fiduciary liability insurance is to provide coverage if an employee mismanages 401(k) plans or other company benefits.
Where Do I Get Executive Liability Insurance?
A trusted insurance partner plays a vital role in ensuring adequate protection and mitigating risks. Having someone you can turn to when you need it most is also paramount to establishing that trust.
We recommend finding a partner that can help you navigate the complexities of a policy like the plans we’re discussing here. Your insurance partner also needs to be proactive about managing the associated risks and possess the expertise to make informed decisions should coverage need to be used.
For us, that’s the bare minimum. We’re committed to protecting our clients and their companies by offering executive liability insurance solutions individualized to their needs. We also provide comprehensive customer service and dedicated team members that look out for your well-being.
Schedule a consultation with a JD Fulwiler insurance expert to learn more about our individualized policies. You can do that by filling out our contact form or calling us directly at 800.735.8325—we’re here to support you and your business needs.