When choosing insurance for a small business, it helps to know the difference between Directors and Officers Insurance (D&O Insurance) and Professional Indemnity Insurance cover. Both can offer protection, but each applies to different risks.
D&O Insurance is for people in charge. Professional indemnity insurance is for businesses providing a professional service. We explain both below.
What Is Directors and Officers Insurance?
Directors and Officers Insurance helps protect senior people in a business. This can mean:
- Company directors
- Board members
- Senior managers
- Charity officers
If they are blamed for making a wrong decision, this insurance offers support. D&O covers the cost of:
- Legal actions
- Insurance claims
- Investigation costs
- Settlements linked to personal liability
D&O insurance is designed to cover the person, not the business as a whole. For example, it does not include public liability insurance or cover for services provided to clients.
What Is Professional Indemnity Insurance?
Professional Indemnity Insurance cover protects a business that offers advice, designs, or any professional service. If a client suffers money loss because of a mistake, this type of cover could help.
Professional indemnity insurance can cover:
- Professional negligence
- Bad advice or mistakes in service
- Loss of documents or data
- Breach of confidentiality
- Defamation or libel linked to services
This cover is suitable for small businesses that work with clients. It gives financial protection if a claim arises.
Key Differences Between D&O and Professional Indemnity
Who is covered?
D&O is for directors or officers facing personal liability. Professional indemnity insurance is for the business and its services.
What does the insurance cover?
D&O covers management decisions. Professional indemnity insurance can cover service errors.
Who makes a claim?
D&O claims may come from shareholders, employees, or regulators. Professional indemnity insurance claims often come from clients.
Where does public liability insurance fit?
Public liability insurance is a separate type of cover. It protects against injury or damage claims from the public, not mistakes in advice or management.
What Level of Cover Might You Need?
The right level of cover depends on the amount of cover a business needs. Factors include:
- Size of the business
- Industry risks
- Value of contracts or services offered
Brokers can help determine how much D&O and professional indemnity insurance you need. This gives you peace of mind if something goes wrong.
Which Businesses Might Need Both Types of Cover?
Some businesses may want both types of insurance to help protect your business from a wide range of risks. For example:
- Consultancies
- Financial services firms
- Design and engineering agencies
- Charities with leaders and staff
Both covers together can help with many situations where insurance claims could happen.
How Brokers Can Help
We help businesses find both Directors and Officers Insurance and Professional Indemnity Insurance cover. By arranging tailored policies, we support clients in getting the right type of cover and amount of cover. This could offer strong financial protection and peace of mind for both business owners and management teams.