What it is
D&O insurance pays defence costs and settlements when directors, officers, and the company itself are sued over management decisions: fundraising representations, hiring and firing, fiduciary duties, and disclosure. For a venture backed startup it is usually the first specialty policy a term sheet requires.
What it covers
- Defence costs for claims against directors and officers
- Securities and fundraising misrepresentation claims
- Employment related claims made against individual directors (separate from EPLI)
- Regulatory investigation costs, where the form provides them
- Side A protection for individual directors when the company cannot indemnify them
What it does not cover
- Deliberate fraud or personal profit, once adjudicated
- Bodily injury and property damage (that is general liability)
- Professional service errors to customers (that is Tech E&O)
- Prior known claims and pending litigation from before the policy starts
What triggers buying it
- Signing a term sheet or closing a priced round
- Forming a board with outside directors
- Hiring executives with prior employer exposure
- Preparing for acquisition or IPO discussions
Who requires it
VC term sheets routinely require D&O at closing, and outside directors often make personal Side A cover a condition of joining the board.
Typical limits
Seed stage companies commonly carry $1M to $3M. Series A companies in California commonly carry $3M to $5M, with towers growing at each round.
Frequently asked questions
When does a startup actually need D&O?
At the first priced round or the first outside board seat, whichever comes first. Investors require it because the board they join carries personal liability.
Does D&O cover claims by employees?
Claims against individual directors can fall under D&O, but wrongful termination, discrimination, and harassment claims against the company belong to EPLI. Most startups buy both.
What is Side A?
Side A is the part of the policy that pays individual directors directly when the company cannot indemnify them, for example in insolvency or derivative suits.
Talk through your stack before you sign the next contract
Send us the term sheet, the customer MSA, or the renewal you are worried about. We will tell you plainly what it requires, what your current programme does about it, and what we would place differently.