Directors and Officers Insurance
Directors and officers insurance, known as D&O, is written for claims that the people running an organization made a poor decision, misled someone or failed in a duty they owed. This page explains Side A, B and C in plain English and how D&O sits beside E&O and EPLI.
What D&O insurance is for
Founders, officers and board members make decisions every week about money, hiring, contracts and strategy. When someone believes one of those decisions harmed them, the claim can name the company and the individuals personally. An investor alleges mismanagement. A creditor says the board looked after itself as the company slid toward insolvency. A regulator opens an inquiry. Defending claims like these can reach a director’s personal finances.
D&O is the policy built around that exposure. Travelers describes it as protection for directors and officers against personal losses when employees, vendors, customers or other parties sue them, with defense costs and settlements tied to allegations of wrongful acts at its core. In D&O wording, a wrongful act generally means an actual or alleged error, misstatement, neglect or breach of duty in the role.
Side A, Side B and Side C in plain English
Side A protects the individuals directly. It responds when the company cannot or will not indemnify its directors and officers, for example because it is insolvent or the law bars it from paying, as with some shareholder derivative suits. For a board member, this is the part of the policy standing between a claim and personal assets, and it often carries no retention.
Side B reimburses the company. When the company indemnifies its leaders and pays their defense costs or a settlement, Side B repays it, usually after a retention, and it is the part most often used. Side C, also called entity coverage, responds when the company itself is a defendant. For public companies it is typically limited to securities claims, while private-company and nonprofit forms generally write it more broadly.
Most policies put all three under one shared limit, so large payments to the company under B and C can shrink what remains for individuals. An order-of-payments clause that puts Side A first is one answer; a separate Side A layer with its own limit is another that boards ask about.
Private companies, startups and nonprofit boards
Private companies face claims from minority shareholders, investors, creditors, vendors, competitors, customers, employees and regulators. A family business with outside shareholders, a firm that borrowed heavily or a company negotiating a sale all have people who could question the board’s choices. Real estate businesses with investor partners and consulting firms taking on partners raise the same questions.
Startups usually reach D&O with their first outside money. Vouch notes that most venture investors expect D&O before signing a term sheet and that board members want protection before agreeing to serve. Ask what your investment documents and bylaws say about indemnifying directors, because those terms shape how Side A and Side B interact.
Nonprofit boards are often volunteers, yet donors, members, employees and regulators can still bring claims. Travelers notes that charitable immunity laws can shield a nonprofit director from an adverse judgment but not from the cost of defending a personal lawsuit. IRMI describes nonprofit D&O forms as usually broader than for-profit versions, with entity coverage, employment practices coverage and lower retentions. A volunteer-run childcare center is a typical example.
How D&O differs from E&O and EPLI
Professional liability, or E&O, answers client claims that the services you delivered were wrong, late or incomplete. D&O answers claims about how the organization is governed and managed. D&O forms commonly exclude claims arising from professional services, so a consulting firm, accounting practice or software company typically reviews the two policies side by side.
Employment practices liability insurance answers claims from employees and applicants about discrimination, harassment, wrongful termination and retaliation. Many private-company and nonprofit packages combine D&O and EPLI, either with separate limits or one shared limit; other D&O forms exclude employment claims so that a stand-alone EPLI policy carries them. Ask which arrangement you have.
D&O is not a stand-in for general liability, either. Bodily injury and property damage claims sit with your general liability policy, and D&O forms commonly carve them out. Theft of company money by an insider is a crime-bond question rather than a D&O one.
What to have ready for a D&O quote
D&O underwriters read your financial picture closely. Expect to share recent financial statements, a description of the business and its revenue, the ownership or capitalization table, who sits on the board, and any plans to raise money, merge, sell or wind down. Lenders, covenants and any missed payments come up too.
List pending or threatened claims, shareholder disputes, regulatory inquiries and past D&O claims. Nonprofits should bring their budget, main funding sources, board roster and the indemnification section of their bylaws. The business insurance quote checklist covers the basics every application begins with.
When comparing quotes, look at the limit and whether Sides A, B and C share it, the retention on each side, whether the policy is claims-made and its prior-acts date, exclusions for professional services and employment claims, and who chooses defense counsel.
A California note for nonprofit boards
California charities answer to the Attorney General as well as to their donors. The Attorney General’s Registry of Charities and Fundraisers runs the registration program, and charities generally must register and file annual financial reports, with limited exceptions. The office’s Charitable Trusts Section investigates and brings actions against charities and fundraisers that misuse charitable assets or engage in fraudulent fundraising.
That oversight is one reason nonprofit boards raise D&O even when the organization is small. Keep registrations and reports current, record board decisions in minutes, and ask how a D&O policy treats a regulatory investigation as distinct from a lawsuit. This is general information; a nonprofit lawyer is the right person for questions about your own governance.
How much does directors and officers insurance cost?
For a small private company, D&O starts lower than many owners expect. National small-business insurance marketplaces published annual premiums from about $525, with a median of roughly $133 a month, about $1,600 a year, at an average $2,500 deductible, as of 2026. Those buyers are mostly companies with fewer than five employees and modest revenue. A venture-backed startup or a company with outside investors, debt or a full board commonly pays well above that median, and the published spread reaches past $12,000. Every figure here comes from published industry data, not from a Mithril1 quote.
Insurers price D&O on revenue or funding raised, the limit, and the retention you carry. One insurer’s published startup guidance shows the steps: about $3,500 to $6,000 a year for $1 million to $2 million in limits up to $10 million raised, $5,000 to $10,000 for $2 million to $3 million in limits between $10 million and $25 million raised, and $7,500 to $15,000 for $3 million to $5 million in limits between $25 million and $50 million raised. For companies under $50 million in revenue, the same source puts each $1 million of limit at about $5,000 to $10,000 a year. At those rates a $3 million limit comes to 3 × $5,000 = $15,000 up to 3 × $10,000 = $30,000, before the lower pricing insurers often apply to higher layers.
Your premium rises with faster growth and more funding raised, debt or a thin balance sheet, a larger board, a pending sale or fundraise, prior suits or regulatory inquiries, a higher limit and a lower retention. The same marketplace data shows technology firms and distributors paying several times what retailers pay. It falls with clean financial statements, independent directors and written governance policies, a claim-free record and a higher retention. Bring your latest financial statements, bylaws and investment documents, review the quote checklist, and then get in touch for a figure based on your own company.
A few useful answers
Common questions
Do small private companies buy directors and officers insurance?
Many do, especially once there are outside shareholders, lenders or investors. Private-company directors can be sued by investors, creditors, vendors, customers and employees, and D&O is written to defend those leaders and the company against such claims.
What is the difference between D&O and E&O insurance?
E&O answers client claims that your professional services were faulty. D&O answers claims about how leaders managed and governed the organization. Each commonly excludes the other’s territory, so firms that sell advice or services often carry both.
Does directors and officers insurance respond to employment claims?
That turns on the form. Some private-company and nonprofit D&O packages add employment practices coverage, while others exclude employment claims and leave them to a stand-alone EPLI policy. Check which arrangement you have and whether the limits are shared.
Why do nonprofit boards ask about D&O insurance?
Volunteer directors can be named personally by donors, members, employees or regulators. Charitable immunity laws can shield a director from a judgment but not from defense costs, and nonprofit D&O forms usually add entity and employment coverage.
What is Side A D&O coverage?
Side A protects directors and officers personally when the company cannot or will not indemnify them, such as during insolvency or in some shareholder derivative suits. Some boards add a separate Side A layer so individuals have a limit the company cannot use up.
What do investors expect from a startup’s D&O insurance?
Venture investors commonly expect D&O to be in place before a term sheet is signed, and incoming board members want to see it before they agree to serve. Bring your investment documents to the quote so the limit and terms match what they ask for.