Companies face many risks and challenges when running a business. It is necessary to be protected against the threat of litigation, extortion, or other employee actions that may expose your company to financial loss. It is also important to safeguard your business against slow payments or a customer insolvency. Executive Risk Insurance programs safeguard businesses and their executives, which allows them to focus on running their operations with peace of mind.
We will review some of the types of Executive Risk coverages available and highlight the importance of working with your insurance agent to design a program that meets your company’s needs.
Directors & Officers Insurance
A company can be sued for various reasons regardless of its size, whether private or public. According to the 2023 Directors Liability Survey Report, cyberattacks, data loss, and regulatory risk are among the top D&O risks. As cyberattacks continue to rise, directors and officers are under tremendous scrutiny to have the appropriate cybersecurity controls in place and to be able to respond to an attack effectively. Failure to do so may lead to a D&O claim.
D&O Insurance protects the personal assets of corporate directors, officers, and their spouses in the event of a lawsuit for actual or alleged wrongful acts in managing a company. The following are just a few exposures D&O Insurance may cover:
- Breach of fiduciary duty resulting in financial losses or bankruptcy
- Fraud
- Misuse of company funds
Employment Practices Liability Insurance
In fiscal year 2022, the Equal Employment Opportunity Commission (EEOC) received almost 74,000 new discrimination charges, an increase of nearly 20% compared to the previous fiscal year. The agency obtained more than $513 million in monetary benefits for victims of discrimination. The average cost of settling a lawsuit out of court is $75,000. All of these figures highlight the need to have the right coverage.
EPLI coverage includes:
- Allegations of discrimination
- Sexual harassment
- Wrongful termination and retaliatory treatment
- It may include defense costs for the company regardless of the fault
Crime Insurance
Although companies may have robust processes to avoid fraud, employee dishonesty remains the largest loss for companies. Dishonest employees and external fraudsters can circumvent the security of even the most robust controls, leading to a potentially significant financial loss. Given the nature of their business, the logistics industry is particularly vulnerable to crime claims. Handling access to duty payments, freight, and property of others makes for an easy target for a dishonest employee.
Crime insurance protection against:
- Employee theft
- Credit card forgery
- Counterfeit paper currency
Trade Credit Insurance
The cost of doing business continues to rise, and protecting the bottom line is a priority for companies of all sizes, especially if your customer cannot pay your invoices. Trade Credit Insurance covers your business-to-business accounts receivable. It will pay out a percentage of the outstanding debt you are owed in the case of customer bad debt, bankruptcy, or insolvency. Having this protection can assist in building better client relationships, as businesses can be confident in expanding credit limits for customers.
Aside from safeguarding your revenue stream, it can help with the following:
- The ability to safely expand sales
- Effectively enhance your borrowing base
- Decrease the need for personal security requirements
It is crucial for business owners to protect their businesses and assets by investing in Executive Risk Insurance. We recommend a company review their insurance policies annually so there are no gaps in coverage. If you have any questions or want to learn more about these coverages, don't hesitate to contact us at letsconnect@avalonrisk.com.
