Non-executive directors in New Zealand often assume they are fully covered by the company's D&O policy. In many cases they are — but there are important gaps that every NED should understand.
The Company Insolvency Problem
The most significant gap is insolvency. If the company becomes insolvent, the D&O policy may be the subject of claims by creditors or liquidators. In some scenarios, the policy proceeds could be unavailable to defend individual directors.
Personal 'Side A' cover is a separate policy that sits entirely outside the company. It responds directly to the individual director and is not affected by company insolvency.
Policy Cancellation Risk
Companies sometimes cancel their D&O insurance during financial difficulty — precisely when directors need it most. A personal policy cannot be cancelled by the company.
Multiple Board Roles
Many NEDs sit on several boards. A personal policy can be structured to cover all your board roles under a single policy — often more efficient and comprehensive than relying on multiple separate company policies.
How Much Does Personal D&O Cost?
For an NED, a personal D&O policy typically costs $500–$1,500/year depending on the number and nature of boards. It is one of the most cost-effective insurance decisions an active NED can make.