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  2. Insurance Terms Starting With D

Drop Down Coverage

What is Drop Down Coverage?

Drop Down Coverage is a type of insurance policy that provides protection for directors and officers of an organization in the event of a negligent act or omission. The coverage may refer to a primary policy that provides coverage when the primary insurer is unable or unwilling to pay out a claim. Drop Down Coverage may also refer to a secondary policy that provides coverage when the primary insurer has already paid out the full amount of its coverage limits. In either case, Drop Down Coverage can provide an additional layer of protection for the directors and officers of an organization.

Drop Down Coverage in More Detail

The primary purpose of Drop Down Coverage is to protect the directors and officers from personal liability when a claim is made against them. This type of policy typically covers legal costs associated with defending the directors and officers, as well as any financial losses resulting from the claim. In some cases, Drop Down Coverage may also provide coverage for damages awarded to the plaintiff in a lawsuit.

Drop Down Coverage can be a valuable tool for organizations seeking to protect their directors and officers from personal liability. By providing additional protection in the event of a claim, the policy can help ensure that the organization is able to cover any costs associated with defending the directors and officers, as well as any damages awarded to the plaintiff. Drop Down Coverage can be particularly important for organizations operating in high-risk industries, as it can help to protect the directors and officers from the financial and legal risks associated with their role.

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