What is the primary purpose of directors and officers insurance (DandO insurance)?

Directors and officers insurance, commonly known as D&O insurance, is specifically designed to protect corporate directors and officers from personal losses that may arise from legal actions taken against them in their capacity as organizational leaders. The primary function of this type of insurance is to provide a safety net for individuals who make decisions that affect the corporate structure and business operations, ensuring that they are not personally financially liable for wrongful acts committed within the scope of their roles.

This coverage is crucial because directors and officers may face allegations of mismanagement, breach of fiduciary duty, or other legal claims stemming from their actions. If a lawsuit is filed against them, the D&O insurance can cover defense costs, settlements, and damages, safeguarding the personal assets of those individuals.

In contrast, the other options pertain to different aspects of corporate insurance and do not capture the essence of what D&O insurance is designed to accomplish. For instance, while covering legal actions against the corporate entity is important (which may be handled by different insurance policies), D&O insurance specifically focuses on the personal protection of individual directors and officers. Similarly, provisions about insuring the corporation's assets or providing general liability coverage are linked to different types of insurance products, reinforcing why personal protection under D&O insurance is