Best Practices: What Every Board Member Should Know About D&O Insurance

Serving on a board means your decisions carry weight, whether you're overseeing strategic growth, navigating compliance risks, or responding to public scrutiny. But what happens when something goes wrong, and your leadership is questioned? D&O Insurance is designed to protect directors and officers against personal liability. And in today’s high-stakes governance environment, this cover is no longer a nice-to-have. It’s essential.

Budget Insurance has put together this guide to help you understand your responsibilities, the current climate, and the best practices for Directors and Officers Liability Insurance.

The role of board members and current trends

Board members in South Africa shoulder more than strategic decisions; they’re also legally and ethically accountable for how organisations respond to risk, regulation, and transformation. As governance standards evolve, so do the pressures. Here’s what today’s directors need to know.

Guiding strategic direction

At its core, a board is tasked with setting the long-term vision of the organisation. Board members, whether serving in corporates, NPOs or SMEs, are expected to challenge assumptions, approve major investments, and ensure growth is sustainable. This strategic oversight means decisions made at board level can have deep operational and financial consequences.

Governance and legal oversight

Board members in South Africa carry a fiduciary duty to act in the best interests of the entity they serve. According to the Companies Act 71 of 2008 1, they can be held personally liable for breaches of duty, negligence, or oversight failures. The legal risks are real, especially in the face of increasing regulatory scrutiny, reputational pressure, and rising litigation costs.

"In addition to the new Companies Act, we see new regulation in the form of the Consumer Protection Act, written on a strict liability basis, as well as regulations like the Protection of Personal Information Act, once again increasing a director’s exposures to potential litigation."

– Quinton Kotze, Financial Lines Product Manager

Accountability in a high-risk environment

From the collapse of prominent companies to corruption probes, South Africans have witnessed how failure at board level can spark serious fallout. Board members are increasingly in the public eye, and they’re expected to respond with transparency and ethical leadership.

Transformation and inclusivity

Diversity on boards in South Africa is a business imperative, not just a compliance tick-box. As companies strive to meet B-BBEE targets, new and younger directors are joining the table. While this brings fresh thinking, it also raises questions around legal education, mentorship, and how protected these new entrants are from risk. Inclusive governance must also be risk-conscious.

Navigating socioeconomic pressures

With energy instability, rising unemployment, and inflation adding pressure to organisations, boards are under more strain than ever. Directors must balance financial resilience with social impact. This dual pressure intensifies personal risk, especially if stakeholders believe poor decisions have caused harm.

Globalisation and futureproofing

Decisions made locally can have global consequences, particularly for companies with international operations or supply chains. Board members must be aware of foreign legal standards, sanctions, and cross-border compliance. Futureproofing through digital transformation, ESG commitments, and strong risk management is now a core part of board strategy.

"Environmental issues (the E of ESG) remain important generally, especially the impact of climate change, which continues to be a concern. Organisations are being encouraged, or even required, to take a broader view of their environmental impact and responsibility."

– Parmi Natesan CEO, IoDSA

7 D&O Insurance best practices board members should know

D&O Insurance only works if it’s built around the realities of your role and your risk. Whether you're new to the board or a seasoned director, these seven best practices will help protect what matters most: your reputation, your decisions, and your personal finances.

1.       Know what D&O Insurance actually covers

Directors and Officers Liability Insurance protects individuals on a board from personal liability if they’re sued for decisions made in their official capacity. It typically covers legal defence costs, settlements, and compensation orders tied to allegations like mismanagement, breach of fiduciary duty, or regulatory non-compliance. However, deliberate fraud or criminal acts are excluded. If you don’t know what’s in and what’s out, you may be unprepared when it matters most.

A recent case involving Delta Property Fund showed that D&O Insurance policy exclusions are typically triggered 2 when the actions of directors and board members involve dishonesty, fraud, or wilful misconduct.

2. Know your company and personal risk profile

Your exposure as a board member depends on your industry, organisational size, and how much decision-making authority you hold. Directors of companies in high-risk sectors like finance, health, or logistics, or those expanding internationally, are more likely to face legal or regulatory scrutiny. Your D&O policy should match your current reality.

For example, the board of a regional logistics firm suddenly faces foreign compliance risks when the company expands cross-border. Without updating the D&O policy, board members could be exposed to claims outside South Africa’s legal framework.

3. Know your duties under the Companies Act

Directors must act with care, skill, and diligence—and always in the best interests of the company. A lack of awareness isn’t a defence. If you breach these duties, even unknowingly, you could face personal liability. Directors Liability Insurance won't rescue you from poor governance if it stems from a lack of basic legal knowledge.

4. Ensure full disclosure to insurers

When applying for or renewing a D&O policy, be transparent. Insurers assess your risk based on the information you provide. Leaving out past legal disputes, pending investigations, or material company changes could give the insurer grounds to reject a future claim.

For example, a business that recently failed a regulatory audit doesn’t disclose this when renewing its D&O policy. Months later, a board member is named in a compliance-related lawsuit, only to discover the claim isn’t covered because of that earlier omission.

5. Check for claims-made policy terms

Most Directors Liability Insurance policies in South Africa are written on a “claims-made” basis. That means they only respond to claims made while the policy is active, not necessarily when the incident happened. If you leave the board or the company switches insurers, and there’s no “run-off” cover in place, you could be exposed after your term ends.

6. Keep your personal liability top of mind

Even if you act in good faith, a supplier, shareholder, or regulator can still hold you personally accountable. Civil claims often name individual directors alongside the company, particularly when decisions are seen as negligent or financially harmful. Directors Insurance helps shield your personal assets from these kinds of legal aftershocks.

7. Work with a specialist consultant or insurer

Directors and Officers Liability Insurance isn’t a plug-and-play product. The right insurer or adviser will tailor cover to your unique board structure. They will ensure that key executives, company secretaries, and non-executive directors are all named on the policy. A specialist consultant can guide you through exclusions, jurisdiction issues, and changing governance risks, without relying on fine print.

Get a Directors and Officers Insurance quote

Serving on a board should be a rewarding experience, not a liability risk. With D&O Insurance from Budget Insurance, you can lead with confidence, knowing you’re protected from personal financial exposure. Get a Directors and Officers Insurance quote today; our team is here to help you work through the fine print and find the right cover for your needs.