D&O Insurance

D&O insurance is a type of management liability coverage for claims involving alleged mistakes, breaches of duty, misleading statements and other wrongful acts by an organization’s directors or officers.

A policy may include:

• Side A: Pays your legal costs directly when your business can't help you, like if it runs out of money or goes under while the lawsuit is ongoing. It matters most for small businesses with tight cash flow or financial uncertainty.
• Side B: Pays back your company when it covers your legal defense costs and settlements on your behalf (called indemnification). It protects your business's cash flow so defending executives doesn't impact daily operations. It's valuable for profitable businesses that can afford to pay upfront but want reimbursement.
• Side C: Covers your company's legal costs when someone sues you and your business for the same issue. It happens when people blame both you personally and your company for a business decision. Companies with multiple owners, partners or investors benefit most from this coverage area.

D&O insurance protects officers and directors from lawsuits related to their management decisions, but it doesn't cover everything. These are realistic situations it actually covers, and when you'll need other types of business insurance:

*Coverage examples shown are general illustrations. Actual coverage depends on your policy terms, exclusions and state regulations.

Businesses and nonprofits should consider D&O insurance when directors, officers, trustees or other leaders could be personally named in a lawsuit.

You may need coverage if your organization:

• Has a board or formal leadership team
• Has investors, shareholders or multiple owners
• Is raising capital
• Wants to recruit experienced board members
• Is preparing for a merger or acquisition
• Could not easily absorb the cost of a leadership lawsuit

Based on our research, the typical small business pays around $85/mo for D&O insurance. However, directors and officers' insurance costs depend on the organization’s size, industry, financial condition, ownership structure, claims history and coverage selections.

Your premium may also change based on:

• Policy limits
• Retention amount
• Side A, B and C structure
• Fundraising or transaction activity
• Regulatory exposure
• Related management liability coverages

Choosing D&O insurance starts with identifying who needs protection and which types of claims your organization is most likely to face. Policy wording can vary significantly, so compare more than just the premium and limit.

Focus on these areas:

1. Confirm who is insured: Check whether the policy covers current, former and future directors and officers, along with trustees, managers, employees or volunteers when applicable.
2. Review Side A, B and C coverage: Determine whether you need protection for individual leaders, reimbursement for the organization or claims made directly against the organization.
3. Choose an appropriate limit: Consider the number of leaders who could be named, expected legal defense costs, investor or shareholder exposure and whether the organization shares the same limit with insured individuals.
4. Set an affordable retention: Review how much the organization must pay before coverage applies and whether different retentions apply to different claim types.
5. Check claims-made terms: Confirm the continuity date, reporting requirements, extended reporting options and how the policy handles related claims.
6. Review major exclusions: Pay close attention to exclusions involving fraud, insured-versus-insured claims, professional services, employment practices, prior litigation and major shareholders.
7. Coordinate related policies: Make sure D&O works alongside employment practices liability, fiduciary liability, cyber, crime and professional liability coverage without leaving avoidable gaps.

Start here for top providers: Best D&O Insurance

We've answered the most frequently asked questions about directors and officers (D&O) coverage below:

Use MoneyGeek's business insurance matching tool below to find the right D&O insurance provider for your company.