D&O Insurance shields company leaders from personal financial loss due to decisions made in their corporate roles. It’s vital for attracting and retaining executives and board members.
Directors & Officers (D&O) Insurance
What Is D&O Insurance?
Directors & Officers Insurance (D&O) protects the personal assets of a company’s leadership — including directors, officers, and board members — if they are sued for alleged wrongful acts in managing the business. This includes mismanagement of company funds, breach of fiduciary duty, misrepresentation, or failure to comply with regulations. D&O policies also reimburse the company for legal costs incurred when defending its executives and may provide entity coverage for the business itself when named in the same suit.
Who Needs D&O Insurance?
Even if you run your business ethically and transparently, leadership can be targeted by lawsuits from employees, shareholders, vendors, regulators, or competitors. The cost of defending against these claims — and potential settlements — can be substantial. For startups and growth-stage companies, D&O coverage is often a requirement from venture capital and private equity investors. For mature organizations, it’s a critical tool to attract and retain qualified executives who expect personal liability protection.
Common industries that often require D&O Insurance include:
- Venture-backed startups and scale-ups
- Publicly traded companies
- Private companies with boards or significant liabilities
- Nonprofits and foundations
- Any company with outside investors, complex governance, or exposure to regulatory scrutiny
What Does D&O Insurance Cover?
D&O Insurance typically covers:
- Breach of fiduciary duty
- Misrepresentation or errors in financial reporting
- Shareholder lawsuits
- Regulatory investigations
- Misuse of company funds
- Failure to comply with corporate governance laws
- Defense costs, settlements, and judgments
What Doesn’t D&O Insurance Cover?
While D&O Insurance offers broad protection, it doesn’t cover:
- Fraudulent or criminal acts (if proven)
- Bodily injury or property damage (covered under GL)
- Professional errors (covered under E&O)
- Contractual disputes
- Insured vs. insured claims (unless endorsed)
- Prior known acts
How Much Does D&O Insurance Cost?
The cost of D&O Insurance varies based on factors like business size, industry, location, and claims history.
Key Cost Factors:
- Company size and revenue
- Industry and regulatory exposure
- Prior lawsuits or claims history
- Funding stage and investor involvement
- Number of directors/officers insured
Typical Cost Range:
- Early-stage startups: $2,000–$5,000/year
- Growth-stage companies: $10,000–$50,000/year
- Late Stage companies: $50,000–$500,000+/year
- PE-backed businesses: $10,000–$500,000/year
- Public companies: $50,000–$500,000+/year
Risk Management Tips
To minimize potential claims:
- Maintain strong corporate governance practices
- Keep accurate and transparent financials
- Disclose risks clearly to investors and stakeholders
- Train directors and officers on fiduciary duties
- Conduct regular board reviews and documentation
Talk to An Expert
Our dedicated experts are ready to provide tailored insurance solutions to clients across a wide range of industries and specialized services.
Schedule a consultation to see how Alliance Risk can reduce your insurance risk.
– We look forward to partnering with you.