Directors & Officers (D&O) Insurance protects a company’s leaders when they’re accused of mismanagement, misrepresentation, or breach of fiduciary duty. As scrutiny on private companies increases, these risks aren’t just limited to public companies. In 2024, U.S. securities-related lawsuits rose to 225 filings, reflecting a broader rise in claims tied to financial reporting and leadership decisions.

For growing companies, the stakes are high. Even unfounded allegations can generate six- or seven-figure legal costs, stall deals, and distract leadership. D&O Insurance ensures those challenges don’t threaten your momentum or the personal assets of the people guiding the business.

Key Takeaways

• D&O protects leaders when management decisions spark lawsuits or investigations.
• Most startups need it once they raise capital, form a board, or face regulatory risk.
• Costs vary based on industry, size, governance, and claims history.
• Common claims involve investors, regulators, cyber incidents, and M&A disputes.

What Is Directors & Officers Insurance?

Directors & Officers Insurance protects a company’s directors, officers, and senior leaders when they’re sued over decisions made on behalf of the business. These claims often allege a “wrongful act” like mismanagement, breach of duty, negligence, or misleading statements. Without D&O Insurance, leaders may need to defend these claims using their personal assets—homes, savings, investments—no matter how unfounded the allegation may be.

Modern D&O programs typically include three components:

• Side A: Protects individual leaders when the company can’t indemnify them, critical during insolvency or when indemnification is legally restricted.
• Side B: Reimburses the company when it indemnifies directors or officers.
• Side C: Protects the company itself when it’s named in certain types of lawsuits.

Combined, these protections ensure both the company and its leadership team are covered when high-stakes decisions are questioned. D&O gives leaders the confidence to operate decisively, knowing one allegation won’t threaten the business or their personal finances.

Why Companies Need Directors & Officers Insurance

Leadership decisions increasingly face scrutiny from investors, employees, regulators, partners, and competitors. Even strong, well-governed companies encounter disputes when markets shift, financing falls through, products miss expectations, or acquisitions disappoint.

Recent data underscores the risk environment:

• 225 D&O-related securities lawsuits were filed in 2024, up from 215 in 2023.
• Rule 10b-5 claims appeared in 95% of filings, the highest level in five years, signaling intense regulatory focus on misrepresentation and disclosure.
• Internal control weaknesses were cited in 12% of filings, even though only 7% were publicly disclosed.
• Rising interest rates, debt pressures, and increased regulatory enforcement are elevating D&O risk across small and mid-market businesses.

D&O Insurance gives leaders confidence that they can make ambitious decisions without putting their personal finances on the line.

What Directors & Officers Insurance Covers

D&O Insurance responds when directors, officers, and senior leaders are accused of making harmful or negligent management decisions. These allegations often surface during moments of financial pressure, rapid growth, or strategic change. The policy helps ensure that legal and financial fallout doesn’t derail the company or expose individual executives to personal loss.

At a high level, D&O insurance covers:

Legal defense costs

Even if a D&O doesn’t reach a verdict, legal fees can still reach six or seven figures. D&O may pay for attorneys, expert witnesses, and court costs tied to covered allegations even if the claim is ultimately dismissed.

Settlements and judgments

If resolving a claim requires a settlement or a court-ordered payment, the policy may cover those amounts up to the policy limit. 

Investor and shareholder lawsuits

Claims alleging breach of fiduciary duty, misrepresentation, poor oversight, or misleading disclosure are core D&O exposures. These suits increasingly target private companies, not just public ones.

Regulatory investigations

Many D&O policies cover the legal costs associated with responding to investigations from agencies like the SEC or DOJ. These costs arise early, often before formal allegations are made, and can be significant

Misstatements and reporting errors

Allegations that leadership provided inaccurate financial information, omitted relevant risks, or issued misleading forecasts fall squarely within D&O.

Breach of fiduciary duty

Claims that leaders failed to act in the best interest of shareholders or the company are common during fundraising, M&A, board transitions, or periods of financial stress.

What Directors & Officers Insurance Doesn’t Cover

D&O insurance focuses on leadership decisions, not intentional misconduct or operational problems. Common exclusions include:

• Intentional fraud or criminal acts once legally proven. Defense costs are typically advanced until wrongdoing is adjudicated.
• Illegal personal gain, such as improper compensation, insider trading, or unlawful remuneration.
• Known claims, threatened claims, or prior litigation that existed before the policy started.
• Bodily injury or property damage, which fall under General Liability or similar operational policies.
• Pollution and environmental claims, which are typically handled by specialized environmental coverages.
• Professional services errors tied to your product or service; these belong under Errors & Omissions (E&O) Insurance.
• Employment-related claims (harassment, discrimination, retaliation), which generally fall under Employment Practices Liability Insurance (EPLI).

Learn more about what Directors & Officers Insurance does and doesn’t cover. 

Directors & Officers vs. Other Types of Coverage

D&O insurance protects leaders when their decisions are challenged but it’s only one piece of a broader risk strategy. Companies should pair D&O with other policies that address operational incidents, service errors, cyber events, or employee-related claims.

Learn more about different types of business insurance.

Who Needs Directors & Officers Insurance?

Any company with leaders making consequential decisions can benefit from D&O Insurance. The moment you bring on outside stakeholders, enter regulated markets, or face material financial decisions, the personal liability of your directors and officers becomes a business issue.

Companies typically need D&O when they:

• Have a board of directors, advisors, or board observers. Board members often require D&O before accepting a role, especially independent directors.
• Raise outside capital. Venture and private equity investors increasingly mandate D&O as part of term sheets to protect their governance interests.
• Sign enterprise or strategic contracts. Large partners and customers may require evidence of D&O coverage before finalizing a deal.
• Operate in regulated industries such as fintech, life sciences, or healthcare where enforcement activity is high and leadership decisions are scrutinized.
• Manage complex cap tables or shareholder dynamics. Disputes over valuations, equity allocations, or disclosure obligations are a common source of D&O claims.
• Prepare for M&A, rapid growth, or restructuring. Leadership decisions during these moments are high stakes and frequently challenged after the fact.
• Want to attract or retain top leadership. Qualified executives expect D&O coverage; many will not join a company without it.

In short: if your company is growing, raising capital, entering new markets, or taking on governance complexity, D&O becomes an essential part of protecting both your leadership team and your momentum.

How Much Does Directors & Officers Insurance Cost?

D&O pricing varies widely across company size, industry, and risk profile. You can better understand its cost by looking at the factors underwriters evaluate when determining your premium.

Company Size and Financial Profile

Underwriters look closely at revenue, assets, burn rate, and financial stability. Larger companies, or those with more complex financials, generally pay more because the potential exposure is higher. Strong governance practices and clean financials can improve pricing.

Industry and Business Model

Sectors with high regulatory scrutiny, rapid innovation cycles, or volatile valuations, such as technology, fintech, and life sciences, tend to face higher D&O premiums. These industries see more investor claims, regulatory inquiries, and shareholder disputes.

Geographic and Regulatory Environment

Companies operating in states with more aggressive litigation climates typically experience higher pricing because the likelihood and severity of claims are greater.

Claims History

Past D&O claims, threatened litigation, or unresolved governance issues can push premiums upward. Even industries with high peer-level claim activity may see increased pricing due to sector risk trends.

Coverage Limits and Retentions

Higher policy limits typically cost more, while larger deductibles (retentions) generally reduce the premium. Pricing doesn’t always scale linearly; higher limits may come with discounted “per-million” rates.

Board Composition and Ownership Structure

A high-profile board, multiple investor groups, or a complex cap table may raise underwriting concerns. These dynamics often signal litigation potential, especially in fast-growing companies or those preparing for major milestones.

How Much Directors & Officers Insurance Do You Need?

Determining the right D&O limit is ultimately a question of risk tolerance, stakeholder expectations, and the potential severity of claims your leadership team could face. 

Your Company’s Stage and Scale

As revenue, headcount, and operational complexity grow, so does the potential impact of a management-level dispute. Larger companies typically buy higher limits because claims, whether from investors, regulators, or counterparties, carry greater financial consequences.

Your Board and Investor Expectations

Many boards have minimum limit expectations, and outside investors frequently require D&O as part of governance oversight. These stakeholders often push for higher limits as the company approaches milestones such as major fundraising, expansion, or M&A activity.

Your Industry’s Risk Profile

Certain sectors see more D&O litigation than others. Technology, fintech, and life sciences companies face elevated scrutiny related to disclosures, regulatory compliance, and product or platform risks. Industry-specific claim trends should influence how much protection you carry.

Your Regulatory and Geographic Exposure

Operating across multiple jurisdictions can push companies toward higher limits. Regulatory inquiries alone can generate significant defense costs even without formal allegations.

Your Ownership and Cap Table Complexity

More shareholders, different classes of equity, or contested valuations all increase the likelihood of disputes. Companies with complex or fast-changing cap tables typically purchase higher D&O limits to match the potential exposure.

Your Strategic Roadmap

If you are planning a major financing, expansion, acquisition, or eventual public-company readiness, your D&O limits should scale with those ambitions. Claims during these transitions are common and often involve multiple parties, which increases defense costs materially.

How Vouch Helps

Vouch delivers D&O coverage designed specifically for the needs and pace of venture-backed companies.

• Comprehensive protection in one place, with D&O integrated alongside other essential startup coverages.
• Expert advisors who understand board dynamics, fundraising pressures, and emerging-risk profiles.
• A purpose-built approach for venture-backed teams, with modern policy language and streamlined underwriting that fits how startups operate.

Need Directors & Officers Insurance? Get started with Vouch today.

Directors & Officers Insurance Claims Examples

D&O claims often arise from routine business decisions: product development, hiring, financial reporting, or competitive pressure. 

The examples below illustrate the types of allegations companies encounter and how D&O Insurance may help protect leadership and the business when those decisions are questioned.

Alleged Use of Competitor’s Technology

A mid-market software firm released a new collaboration feature, prompting a competitor to claim the company’s VP of Product had developed the technology while previously employed there; the firm’s D&O policy covered the legal defense needed to contest the allegation.

Regulatory Subpoena and Document Request

A regional HR services provider received an SEC subpoena seeking financial records and customer information related to a recent reporting period; its D&O policy covered the attorneys’ fees required to respond to the investigation.

Trade Secret Misappropriation Allegation

A growing project-management platform hired a senior operations executive from a competing firm, which later filed suit alleging misappropriation of trade secrets; the company’s D&O coverage funded the defense until the matter was resolved following a successful early motion to dismiss.

Frequently Asked Questions

Is Directors & Officers Insurance required by law?

No. But investors, board members, and sophisticated partners often require it before agreeing to work with a company.

Does Directors & Officers Insurance cover the company or just individuals?

It can cover both. Side B and Side C apply to the company, while Side A protects individuals when the company cannot indemnify them.

Do early-stage companies really need Directors & Officers Insurance?

Yes. Claims often arise during fundraising, contentious founder changes, cap table disputes, or early customer partnerships, all common before profitability or scale.

Does Directors & Officers Insurance cover operational incidents?

No. Injuries, property damage, or service errors fall under other policies such as General Liability, Business Property, or E&O.

Is Directors & Officers Insurance “set and forget”?

No. You should reassess limits annually or when major milestones occur, like fundraising, expansion, leadership changes, or entering regulated markets.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.