D&O Insurance is necessary because when claims are made against a company they are often made directly against its board of directors at the same time. These claims are most often employment related so make certain there is employment practices coverage. However these claims can be essentially any type of civil lawsuit including conflict of interest. D&O Insurance is specifically designed to protect directors and officers who are sued for activities conducted within the performance of their duties on behalf of the company. You should have this coverage for any board on which you serve.
As a board member you can insist upon D&O Insurance before you serve. You should do so in all instances but particularly if the company has any employees, handles funds or provides services. Some questions to ask in addition to whether there is a policy would include what the policy limit is, whether the policy is claims made and if so is tail coverage available, whether defense costs are inside or outside the policy limit and whether that are any exclusions. Your company probably has an insurance broker or agent who can help you understand if there exists proper coverage. Otherwise ask the company’s attorney for that information.
An alternative is to have a personal umbrella insurance policy which would provide covered protection but would cost you money.