Directors & Officers Liability Insurance (D&O) for small businesses
Directors and officers (D&O) liability insurance protects the personal assets of a company's directors, officers, and (often) the company itself from claims alleging wrongful acts in the management of the business — such as breach of fiduciary duty, misrepresentation to shareholders, or regulatory violations.
Directors and officers (D&O) liability insurance protects the personal assets of a company's directors, officers, and (often) the company itself from claims alleging wrongful acts in the management of the business — breach of fiduciary duty, misrepresentation to shareholders, regulatory violations, or other management-level decisions.1 The coverage is widely misunderstood to apply only to public companies; in fact, D&O is broadly relevant to any private company with outside investors, a board of directors, institutional stakeholders, or an eventual exit path. Per Embroker's published D&O cost benchmarks for sub-$50M-revenue companies, small-business D&O premiums run approximately $5,000 per $1 million of coverage annually, with total annual premiums typically $2,000 to $15,000 depending on company size, funding stage, industry, and limits.23 Venture capital and private equity term sheets almost always require D&O coverage as a closing condition — which makes D&O a functional requirement for any company raising institutional capital, not a voluntary policy.
This page walks through who needs D&O, the three-side coverage structure, what it covers, what it doesn't, how to size limits, how it's priced, and which carriers in our coverage set are the stronger D&O options.
Who needs D&O
D&O is appropriate for companies with any of the following:13
- Outside investors. Angel investors, venture capital, private equity, or institutional stakeholders. Investors have standing to bring claims against directors and officers alleging breach of fiduciary duty, misrepresentation, or conflicts of interest. VC and PE term sheets almost universally require D&O coverage as a closing condition.
- A board of directors. Any company with a formal board — venture-backed, privately held, or nonprofit — needs D&O to enable board recruitment and to protect directors from personal-asset exposure. Qualified outside directors frequently refuse to serve without D&O in place.
- Plans to raise capital. D&O is often put in place before a funding round closes; investors expect it during diligence, and the cost of adding it at the last minute is higher than adding it in advance.
- Plans to sell the company. Acquirers diligence D&O coverage during M&A; gaps create deal-friction. Post-close "tail" D&O coverage (extended reporting period) is standard in M&A transactions.
- Nonprofit organizations. Nonprofits need D&O to recruit volunteer board members. State nonprofit law in many jurisdictions creates director-liability exposure, and volunteer directors won't serve without personal-asset protection.
- Family-owned and closely-held businesses with potential disputes. Disputes between family shareholders, minority-interest holders, or former partners frequently become D&O claims.
D&O is most critical for:
- Venture-backed SaaS and tech startups (Series A onward).
- Private equity portfolio companies.
- Companies preparing for exit or IPO.
- Nonprofits with active boards.
- Growing private companies approaching institutional-investor readiness.
Industry-specific detail: See saas-tech, it-consultants, consultants, and marketing agencies for industry-specific D&O context.
What D&O covers: the Three Sides
D&O policies are structured around three coverage "Sides" that respond to different claim scenarios:13
Side A — Non-indemnifiable loss to directors and officers. Pays directly to directors and officers when the company cannot or will not indemnify them. This happens in three main scenarios:
- Corporate bankruptcy or insolvency (the company has no assets to indemnify).
- Derivative suits where state corporate law prohibits company indemnification.
- Company refusal to indemnify (rare but possible in disputes).
Side A is the personal-asset-protection coverage — the reason individual directors care about D&O. Many larger programs add a Side A Difference-in-Conditions (DIC) layer with broader terms, no erosion from Side B/C claims, and standalone limits for pure personal-asset protection.
Side B — Corporate reimbursement. Reimburses the company when it indemnifies its directors and officers. Most corporate bylaws require the company to indemnify directors and officers to the fullest extent permitted by law; Side B reimburses the company for those indemnification payments.
Side C — Entity coverage. Extends coverage to the company itself for claims brought directly against the corporation:
- For public companies, Side C is typically limited to securities claims (shareholder suits alleging misrepresentation).
- For private companies, Side C is typically broader — covering the full range of management claims brought against the entity, not just securities claims.
Standard covered claim categories:
- Breach of fiduciary duty.
- Misrepresentation to shareholders, investors, or regulators.
- Mismanagement of corporate assets.
- Conflicts of interest and self-dealing claims.
- Regulatory investigations and defense costs (depending on form and state).
- Failure to supervise.
- Mergers and acquisitions claims (for directors approving transactions).
- Employment practices claims in some forms (though EPLI is the primary coverage).
Policies are written on a claims-made basis with retroactive dates and optional extended reporting periods, same structure as E&O.
What D&O doesn't cover
D&O is scoped to management-liability claims. Standard exclusions:1
- Intentional fraud or criminal acts — typically subject to "final adjudication" language, so defense is advanced until a final non-appealable ruling confirms the excluded conduct.
- Insured-vs-insured disputes — claims between the company and its own directors or officers (the "insured-vs-insured exclusion"). Carve-outs usually exist for derivative actions, bankruptcy-trustee claims, and former-director claims beyond a time threshold.
- Bodily injury and property damage — addressed by general liability.
- Professional services claims — addressed by professional liability / E&O.
- ERISA and benefits claims — addressed by fiduciary liability insurance (separate line).
- Prior known claims — matters known to the insureds before the policy's retroactive date.
- Pollution and environmental claims.
- Punitive damages in some states (governed by state law on insurability).
Entity securities coverage (Side C) and fraud. For public companies, Side C securities coverage has specific exclusions for fraud, intentional misstatements, and certain insider-trading claims. Private-company Side C is typically broader.
Policy limits and how to choose them
D&O limits are per-claim and aggregate, with no "per occurrence" structure since management claims are typically single events or series treated as one claim.
Typical limit structures:
- $1M limit / $1M aggregate — common for early-stage startups pre-Series A, some nonprofits.
- $2M–$3M / $2M–$3M aggregate — common for seed to Series A startups; VC-preferred floor for most term-sheet closing conditions.
- $5M / $5M aggregate — common for Series B and later, growing private companies, 50+ employee businesses.
- $10M+ / $10M+ aggregate — later-stage companies, pre-IPO prep, PE portfolio companies.
Side A-only DIC layers. For larger programs, a separate Side A DIC layer sits on top of the primary D&O tower, providing additional pure personal-asset protection for directors. Common at the $5M+ limit level.
Retention / deductible structures. D&O typically has a retention (self-insured amount) rather than a deductible. Common retentions:
- $0 retention for Side A coverage (directors shouldn't have personal-asset exposure for retention).
- $2,500–$25,000 retention for Side B and Side C.
- Higher retentions for specific coverage parts — employment practices sub-limits, securities claims — typically $25K-$250K.
Defense within limits. Most D&O policies pay defense costs within the policy limits — defense erodes the settlement amount available. A $2M D&O claim defending through trial can consume $300K-$700K+ in defense costs. Management-liability claims are typically long and expensive to defend.
When to increase limits:
- Funding rounds. Series A typically triggers a move from $1M to $2M-$3M; Series B triggers $3M to $5M.
- Acquisitions. Acquirers often require increased D&O limits during diligence.
- Growth in headcount and board size. More directors means higher aggregate exposure.
- Public-company readiness. IPO prep typically requires $10M+ in D&O plus dedicated Side A DIC.
Cost and how to buy D&O
For full cost analysis with industry breakdowns, top carriers by published starting price, and 2026 benchmark data, see our directors & officers liability insurance (d&o) cost guide.
Cost benchmarks vary widely by stage and industry. Embroker's published D&O benchmarks for sub-$50M-revenue companies:2
- Approximately $5,000 per $1M of coverage annually for early-stage startups.
- Annual premium range $2,000 to $15,000 for $1M–$3M in coverage at seed to Series A.
- Higher at Series B+ as headcount, revenue, and investor scrutiny all scale.
Why D&O cost varies more than other lines:
- Funding stage. Pre-Series A companies often qualify for lower premiums than post-Series B with higher revenue and board complexity.
- Industry. Tech, healthcare, financial services, and regulated industries face higher premium loads; manufacturing and stable industries lower.
- Revenue and headcount. Higher revenue and larger board exposures scale premium.
- Prior claims. D&O claim history significantly affects pricing; D&O tail claims can surface years after the claim-triggering event.
- Board composition. Larger boards, boards with public-company experience, or boards with regulated-industry expertise affect underwriting.
- Limits and retention structure. Higher limits increase premium; higher retentions reduce it.
Carriers and placement paths.
- Embroker — Best for venture-backed tech and SaaS companies. D&O bundled in the Startup Package on Munich Re-backed paper; startup-specific underwriting depth.3
- Coalition — Limited D&O exposure in our coverage set; Coalition is cyber-specialist with expanding specialty-lines offerings.
- The Hartford — D&O as part of the 10-line direct-bind ladder on A+ paper.4
- Hiscox — D&O on A-rated admitted paper; professional-services underwriting.5
- Travelers Small Business — D&O on A++ paper as part of the 10-line ladder.6
- biBerk — biBerk does not currently write D&O on Berkshire Hathaway Direct paper. Listed in the top_carriers array for reference consistency, but D&O buyers should pair biBerk with another carrier.
What underwriters evaluate: company stage and funding history, board composition (names, backgrounds, public-company experience), industry and state, revenue and headcount, prior claims history (5-10 year window for D&O), M&A activity, current or prior litigation, governance documents (bylaws, committee charters), and recent regulatory filings.
State-by-state requirements for D&O
D&O is not mandated by state statute in any of the 50 states.1 No state law requires private businesses to carry D&O coverage.
State corporate law does create the underlying liability exposure that D&O responds to. Key state regulatory frameworks:
- Delaware — the corporate domicile for most venture-backed companies. Delaware corporate law creates specific director fiduciary-duty frameworks that D&O claims frequently invoke.
- California — California Corporations Code creates broader director-liability exposure than Delaware in some respects, particularly for consumer-facing businesses. California Department of Insurance oversees the insurance market where D&O is placed.7
- New York — NY Business Corporation Law and NY DFS regulatory framework regulate the commercial insurance market where D&O is placed.8
- Florida — Florida Business Corporation Act plus FL Office of Insurance Regulation market oversight.9
- Texas — Texas Business Organizations Code plus Texas Department of Insurance market regulation.10
- Other state corporate frameworks — most states follow a similar structure to Delaware or California; specific state corporate law varies. The commercial insurance markets where D&O is placed across all 50 states are regulated through the respective state insurance authorities.11
Multi-state operations. Companies operating across multiple states have D&O exposure under the corporate law of each state where they operate or where their stock is held. D&O policies respond to claims regardless of state, but underwriters evaluate operating states as part of the risk profile.
Frequently asked questions
Is D&O only for public companies?
No — private companies with outside investors, a board, or exit plans need D&O as much as (often more than) public companies. VC and PE term sheets almost universally require D&O. Nonprofits with active boards need D&O to recruit directors.
Why does my VC require D&O as a closing condition?
VCs sit on portfolio-company boards and need personal-asset protection. They also want the company covered for claims that might arise from the funding transaction itself (securities claims, misrepresentation claims). Term sheets typically require D&O in place at or before closing.
How much does D&O cost for a startup?
Embroker's published benchmark for sub-$50M-revenue companies: approximately $5,000 per $1M of coverage annually, with total premiums commonly $2,000-$15,000 for $1M-$3M in coverage at seed to Series A stages.23 Higher at Series B+ and for companies in regulated industries.
What are Side A, B, and C?
Side A pays directly to directors and officers when the company can't indemnify them (bankruptcy, derivative suits, refusal). Side B reimburses the company when it indemnifies its directors. Side C covers the company itself for claims brought directly against the entity. All three sit in one D&O policy.
What's the difference between D&O and E&O?
E&O covers claims from clients alleging professional-service errors. D&O covers claims from shareholders, investors, employees, regulators, and creditors alleging wrongful acts in management of the company. Both can apply to the same business.
What's the difference between D&O and EPLI?
D&O covers management-liability claims (fiduciary duty, securities, governance). EPLI covers employment-related claims (wrongful termination, discrimination, harassment). Most D&O policies exclude employment-practices claims and route them to EPLI.
Do nonprofits need D&O?
Yes — nonprofits need D&O to recruit volunteer board members. Qualified outside directors frequently refuse to serve without personal-asset protection. State nonprofit law in many jurisdictions creates director-liability exposure that D&O responds to.
What happens to D&O when a company is acquired?
Acquirers typically require a "tail" D&O policy (extended reporting period) to cover claims arising from pre-acquisition acts that surface after closing. Tails are usually 6-year to 10-year extensions and are standard in M&A transactions.
Can a single founder / sole owner use D&O?
Usually no — D&O covers claims against directors and officers in a multi-stakeholder structure. A sole owner with no outside investors, board, or employees has minimal D&O exposure; E&O and EPLI are more relevant.
Related policies
D&O pairs with several related management-liability and business-liability lines:
- Employment practices liability (EPLI) — covers employment claims that D&O typically excludes.
- Professional liability / E&O — covers client professional-service claims; separate from D&O management-liability claims.
- Fiduciary liability — covers ERISA and benefits-plan claims that D&O excludes.
- Cyber liability — covers data-breach exposures.
- General liability — covers bodily injury and property damage that D&O excludes.
Citations
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Directors & Officers Insurance — https://www.insureon.com/small-business-insurance/directors-officers ↩ ↩2 ↩3 ↩4 ↩5
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The Cost of D&O Insurance — https://www.embroker.com/blog/directors-and-officers-insurance-cost/ ↩ ↩2 ↩3
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Does Your Small Business Need D&O Insurance? — https://www.embroker.com/blog/startup-directors-and-officers-insurance/ ↩ ↩2 ↩3 ↩4 ↩5
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The Hartford — Business Insurance — https://www.thehartford.com/business-insurance ↩
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Hiscox Small Business Insurance — https://www.hiscox.com/small-business-insurance ↩
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Travelers — Small Business Insurance — https://www.travelers.com/small-business-insurance ↩
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California Department of Insurance — https://www.insurance.ca.gov ↩
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New York State Department of Financial Services — https://www.dfs.ny.gov ↩
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Florida Office of Insurance Regulation — https://www.floir.com ↩
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Texas Department of Insurance — https://www.tdi.texas.gov ↩
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Types Of Policies — Commercial Insurance — https://www.iii.org/publications/commercial-insurance/what-it-does/types-of-policies ↩
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Top carriers
Compare top directors & officers liability insurance (d&o) carriers
Recommended carriers for this coverage, ranked against our 6-dimension methodology.
Sub-threshold = fewer than 20 NAIC complaints in 3 years (data is too sparse to score reliably). N/A (broker) = not a carrier. See full methodology →
| Carrier | Our score | Positioning | Starting price | Coverage | Claims | AM Best | NAIC index | States | Quote channel |
|---|---|---|---|---|---|---|---|---|---|
 | 7.0 | Venture-backed tech & SaaS | — | 7.0/10 | 7.0/10 | — | N/A (broker) | 50 states | Broker portal |
 | 7.9 | Single-carrier program for SMBs | GL $68/mo | 9.0/10 | 8.0/10 | A+ | Sub-threshold | 50 states | Direct online |
 | 7.0 | Professional services E&O focus | GL $30/mo | 7.5/10 | 8.0/10 | A | 8.15 | 50 states | Direct online |
 | 8.1 | Broad-ladder primary carrier | GL $42/mo | 9.0/10 | 8.0/10 | A++ | Sub-threshold | 50 states | Direct online |
 | 7.7 | Tech & data-handling specialist | Cyber $83/mo | 8.5/10 | 8.0/10 | A | Sub-threshold | 50 states | Direct online |
About complaint index data: Values are 3-year averages from NAIC Consumer Information Source for commercial liability. Carriers with fewer than 20 complaints in the 3-year window are labeled "sub-threshold". A reliability call about data volume, not a finding about the carrier. Brokers (Category D) are structurally N/A. See our complete methodology.
- 7.0
- Positioning
- Venture-backed tech & SaaS
- Starting price
- —
- Coverage
- 7.0/10
- Claims
- 7.0/10
- AM Best
- —
- NAIC index
- N/A (broker)
- States
- 50 states
- Quote channel
- Broker portal
- 7.9
- Positioning
- Single-carrier program for SMBs
- Starting price
- GL $68/mo
- Coverage
- 9.0/10
- Claims
- 8.0/10
- AM Best
- A+
- NAIC index
- Sub-threshold
- States
- 50 states
- Quote channel
- Direct online
- 7.0
- Positioning
- Professional services E&O focus
- Starting price
- GL $30/mo
- Coverage
- 7.5/10
- Claims
- 8.0/10
- AM Best
- A
- NAIC index
- 8.15
- States
- 50 states
- Quote channel
- Direct online
- 8.1
- Positioning
- Broad-ladder primary carrier
- Starting price
- GL $42/mo
- Coverage
- 9.0/10
- Claims
- 8.0/10
- AM Best
- A++
- NAIC index
- Sub-threshold
- States
- 50 states
- Quote channel
- Direct online
- 7.7
- Positioning
- Tech & data-handling specialist
- Starting price
- Cyber $83/mo
- Coverage
- 8.5/10
- Claims
- 8.0/10
- AM Best
- A
- NAIC index
- Sub-threshold
- States
- 50 states
- Quote channel
- Direct online
Full per-carrier analysis lives in each carrier review. See our scoring methodology for how we weight the dimensions above.
See which carriers fit your business.
Tell us about your business. We'll rank the carriers in our coverage set by industry fit, state availability, and your selected coverages.