What is the primary function of directors and officers liability insurance?

The primary function of directors and officers liability insurance is to protect company executives, such as directors and officers, from claims alleging wrongful acts in the course of their duties. This type of insurance covers legal costs, settlements, and other expenses that may arise from lawsuits or claims related to their decision-making, management practices, or other responsibilities including breach of fiduciary duty, misrepresentation, and negligence.

This protection is crucial as executives often face significant personal financial risk due to the nature of their roles and the potential for litigation stemming from their decisions. Therefore, the insurance serves to safeguard the personal assets of these individuals and ensure that they can fulfill their duties without the fear of personal financial loss due to claims made against them for alleged mismanagement or misconduct.

The other choices do not align with the purpose of directors and officers liability insurance. Coverage for physical damages, employee workplace injuries, or employee health benefits pertains to different types of insurance policies and does not focus on protecting executives from legal liabilities related to their professional actions.