Corporate insurance plans are much more important these days. Adequately covering directors and officers is much harder and more expensive. The risks and liabilities are much better defined - but also much more severe. Investors need to make sure that the right coverage at the right price is firmly in place.
The board of directors has a fiduciary responsibility to protect the assets of the company they serve. Good governance involves the use of insurance for various predictable risks. Some companies opt to self-insure for some risks, a strategy to employ when a company has a large number or employees or a large amount of control over the activity they are self-insuring against. If a company chooses to purchase insurance against risk, a good understanding of the policy chosen is important. In today's litigious society, a company, CEO or corporate director cannot afford to be without coverage.
When reviewing corporate insurance policies, directors or committees should pay particular attention to exclusions. Exclusions are items not covered by a particular insurance policy.
The following are three main reasons why certain issues are not covered:
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