Executive risk insurance (aka management liability insurance) helps protect key employees, managers, board members, investors, directors, officers and business entities against liability exposures that exist when running and scaling your business.
Executive risk insurance is a "catch-all" term that's comprised of several different policies or lines of coverage. These policies can be purchased "stand-alone" or combined into a "package." These lines of coverage include:
Directors & Officers insurance (D&O for short) protects individuals and entities listed below for claims made against them:
This can include claims resulting from managerial or financial decisions that may have adverse impacts or consequences. The most common claim types that D&O insurance would protect against would be:
For tech startups, you'll often be required to purchase D&O insurance after raising a "priced-round" (Series A+).
Employment Practices Liability insurance (EPL for short) protects employees, directors, officers, and managers against wrongful acts associated with employment issues. Examples of "wrongful acts" are:
It's recommended to include third-party coverage to cover allegations brought from clients, vendors, suppliers, etc. as well.
Crime insurance protects and reimburses your business from any financial losses due to crime events. Examples would include:
Fiduciary insurance protects those who are responsible for managing and administering employee benefit programs at your company. It provides coverage due to human error, omissions, and negligence. Examples of when fiduciary insurance would be used:
A policy aggregate limit of liability is the maximum amount an insurance company will pay for losses within a specified timeframe (usually the policy period). Example:
Coverage for defense costs means your insurance company can provide capital to defend you and/or your business during a claim (lawyers, attorney fees, etc.) for a covered cause of loss.
It's also important to note that defense costs can deplete your total policy aggregate limit of liability. A separate limit for defense costs only is available and recommended if needed.
Retention is a specific dollar amount you must pay first before your insurance company will respond to a loss or claim you submit. If you submit a loss or claim prior to hitting the specified retention limit, you would have to pay defense and/or indemnity costs associated until the retention limit was reached.
