Directors and Officers Liability Insurance: What Is D&O Coverage?
Directors and officers insurance protects your leaders if they're named in a lawsuit against your company.
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Directors and officers insurance, also called D&O liability insurance, protects your organization’s leaders from personal losses. It can pay out if someone sues your business and names a board member or chief executive in the suit. This policy will cover their legal expenses and damages owed, up to its limits.
If your company or nonprofit has a board of directors or professional investors, consider buying this business insurance. Here’s what it does and how you can get it.
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Best options for directors and officers insurance
Most types of business insurance use standard language and terms, so policies are similar from one insurer to another. That’s not the case with D&O. We recommend working with an insurance agent to make sure you get coverage that covers your business’s specific risks.
That said, the following are some of our editorial team’s best business insurance companies. They got high marks for financial strength from credit rating agency AM Best, and they see relatively few complaints filed with state regulators given their market share. All of these should be good options.
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Chubb
Chubb issues D&O policies in more than 40 countries that can comply with local risks, which makes it a good fit for multinational companies. Read our review.
Cincinnati Insurance
Cincinnati’s D&O policies are part of a larger suite of management liability coverages that get access to risk management resources. That includes an employment law hotline and special services for nonprofits.
Travelers
Travelers agents can add additional Side A “difference in conditions” D&O coverage to your company’s insurance package. This protects your directors and officers if a case exceeds your policy limits or your company files for bankruptcy. Read our review.
The Hartford
In addition to public and private companies, The Hartford includes D&O coverage in a package specific to financial institutions. You can also get errors and omissions insurance, fiduciary liability coverage and fidelity bonds. Read our review.
What is D&O insurance?
Directors and officers insurance protects your organization’s top executives in case someone sues the company and names them as individuals. It pays out to cover their legal defense.
What does directors and officers insurance cover?
In general, D&O policies can cover your company and its directors in cases like:
- Employment lawsuits. An employee might feel they've been treated unfairly and could implicate an officer of the company.
- Creditor, investor or shareholder lawsuits. A creditor could sue the directors of a company after it fails to repay a loan. Or, an investor or shareholder could bring a lawsuit because of poor company performance.
- Legal mistakes and failures. A business could fail to follow pollution regulations, resulting in a lawsuit, for example.
- Misrepresentation claims. Over the last few years, several companies have faced lawsuits accusing them of “AI-washing,” or overstating how much their technology can do, for instance.
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What are the types of D&O coverage?
D&O policies have three types of coverage, known as “sides.” These explain scenarios when the policy can pay out:
- Side A: Covers company directors and officers when the company can’t reimburse them — like if the company is insolvent.
- Side B: Reimburses the company after it pays for a director or officer’s legal costs.
- Side C: Covers the company itself if both the business and its directors and officers are named in a lawsuit — like a securities claim against a public company.
Typically, a D&O policy includes all three sides, and they share an aggregate limit. But you may be able to adjust your limits for extra protection.
For instance, you could add additional coverage for Side A to specifically protect your leaders’ finances. (You can also buy just Side A coverage.) This is especially important if the company files bankruptcy and depletes its D&O coverage before it can pay directors’ legal bills.
Does D&O insurance cover investigations?
If a regulator subpoenas you or your executives, you might need to hire lawyers to prep for hearings. Your D&O coverage should kick in when an investigating agency names a director or officer in writing, according to Marsh, a major global insurance company .
Can your insurer force you to settle?
Yes, if your D&O policy includes a “hammer clause.” A hammer clause requires you to accept a settlement if your insurer wants you to. If you want to keep fighting the case, your company pays for some or all of the defense. (These show up in errors and omissions policies, too.)
Accepting a hammer clause might make your coverage cheaper, since it lets the insurance company limit its own losses by stopping a legal case. But accepting a settlement can be bad for your company or leaders’ reputations — even if they don’t have to admit fault.
Ask your insurance agent whether your policy has a hammer clause so you have the chance to remove it if you want.
Can you choose your own lawyers?
Yes, if your D&O policy is written on a “reimbursement/indemnity” form instead of a “duty to defend” form.
With a “reimbursement/indemnity” policy, you can choose the counsel you want to represent your company and executives. But you’ll have to pay for it out of pocket. Your insurer will review your spending and reimburse your company. But they can reject some spending if auditors don’t think it was necessary.
Think of a “duty to defend” policy like going to an in-network hospital. You’ll choose legal representation from a list of firms pre-approved by your insurer. Then, the insurance company must defend you through the entire process.
Your insurance agent can help you understand the ins and outs of the policies you’re considering and choose the one that best meets your needs.
What does directors and officers insurance not cover?
D&O insurance generally does not cover:
- Fraud and criminal offenses. An executive will not be covered if they steal money from the company or are arrested for driving under the influence, for example.
- Pending and prior litigation. Cases that are in progress or happen before the policy begins are not generally covered.
- Bodily injury or property damage. Customer injuries or property damage would typically fall under a general liability insurance policy.
- Insured-versus-insured claims. One director or officer suing another is usually not covered.
- Employee Retirement Income Security Act claims. Claims of mismanagement of employee benefit plans would typically be covered by fiduciary liability insurance.
How much does D&O insurance cost?
The median D&O insurance premium is $138 per month or $1,653 per year, according to online insurance marketplace Insureon .
Like all types of business insurance, D&O insurance costs vary depending on things like:
- Company size, revenue and number of employees. A large company with many employees generally has more risk than a smaller one.
- Amount of coverage. The more coverage you add, the more your policy will cost. Companies pay between $5,000 and $10,000 for every $1 million in coverage on average, according to Moody Insurance Worldwide .
- Policy type. Buying Side A coverage only will cost less than getting a complete D&O policy.
- Industry. Some sectors see more lawsuits than others. For instance, biotech companies are under lots more regulatory scrutiny than retail chains.
- Years in business and management experience. A new business with inexperienced managers can be riskier to underwrite.
- Business ownership structure. Publicly traded companies are often higher risk than private companies.
- Claims history. Insurers review your company’s history to look for previous lawsuits.
It’s important to shop around before you purchase a policy. You’ll have a better sense of what premium is reasonable for your business if you get several different quotes. An agent can help you with this.
What's self-insured retention?
Self-insured retention is the dollar amount you have to pay on each claim before the insurer will start covering costs. You may see this rate listed on the declaration page of your D&O policy. You can think of it as a type of deductible.
A low-risk company might have a retention of $1,000, whereas a high-risk company might have a retention of $250,000.
You can also think of a retention as a cost-control tool. As your retention goes up, your premium goes down. That’s because you are taking on some of the risk that would otherwise be shouldered by the insurance company.
Does your organization need D&O insurance?
You should get D&O insurance if your company:
- Has a board of directors. Individuals may not want to serve on the board if they're not protected from lawsuits. This may include nonprofit organizations and entities like homeowners associations.
- Has private equity investors. Venture capital and other private equity firms may require you to have D&O coverage.
- Is publicly traded. Shareholders can sue directors and officers if they are disappointed in stock performance. Because of this, public companies generally need D&O coverage more than private companies do.
- Is recruiting top talent for executive-level positions. This protection could make your job offers more competitive.
- Includes indemnity provisions in your executives’ employment contracts. Indemnity provisions promise that your company, not an individual executive, will pay legal expenses if an executive is sued for something related to their job. If you include that in your contracts, D&O insurance can help protect your business’s savings in the event of a lawsuit.
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- 1. Marsh Academy of Risk. Investigations and the Outcomes: Managing the Crisis With a D&O Policy. Accessed Mar 6, 2026.
- 2. Insureon. Directors and officers insurnace cost. Accessed Mar 6, 2026.
- 3. Moody Insurance Worldwide. What is a Hammer Clause in D&O Insurance?. Accessed Mar 6, 2026.
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