D&O Insurance.
Directors and Officers (D&O) Insurance protects the personal assets of your startup’s leadership team — including founders, executives, and board members — if they’re sued for decisions made on behalf of the company.
📉 It also covers legal fees, settlements, and judgments resulting from alleged wrongful acts, including:
- Breach of fiduciary duty
- Misrepresentation to investors
- Regulatory violations
- Mismanagement of company funds
- Employment-related claims (wrongful termination, discrimination)
Tech Startups Need D&O Insurance.
Tech startups are high-risk, high-growth ventures that frequently deal with:
- Rapid hiring and firing cycles
- Investor scrutiny
- Intellectual property disputes
- Regulatory compliance (e.g., data privacy, AI ethics, SEC rules)
- Product failures and customer disputes
Even a pre-revenue or seed-stage tech startup can face lawsuits from:
- Investors
- Employees
- Customers
- Government agencies
- Competitors
🛡️ D&O Insurance acts as a safety net to protect the leadership AND the company itself.
Covered Under a D&O Policy.
| Covered Party | Description |
|---|---|
| Directors | Board members, including independent or advisory board |
| Officers | C-suite (CEO, CTO, CFO, etc.) |
| Founders | Even if not formally titled as “officers” |
| Company (entity) | In most policies (via “Side C” coverage) |
What Does D&O Insurance Cover.
Side A Coverage (Individual Protection)
- Protects directors/officers personally when the company cannot indemnify them (e.g., bankruptcy)
Side B Coverage (Company Reimbursement)
- Reimburses the company if it indemnifies executives for legal expenses
Side C Coverage (Entity Coverage)
- Protects the company itself when it is sued alongside executives
What’s Not Covered.
| Not Covered | Explanation |
|---|---|
| Fraud or criminal acts | Proven intentional illegal behavior is excluded |
| Bodily injury/property damage | Covered under general liability insurance |
| IP infringement | Handled via intellectual property insurance |
| Cyber incidents | Requires a standalone cyber liability policy |
| Contract breaches | Often excluded or heavily limited |
Common D&O Claims Against Startups
| Scenario | Real-World Risk |
|---|---|
| Investor lawsuit | Allegations of misleading financials or projections |
| Employment lawsuit | Claims of wrongful termination or discrimination |
| Competitor litigation | Accusations of unfair business practices |
| Vendor dispute | Misrepresentation in contract negotiations |
| Regulatory action | Non-compliance with data/privacy laws |
How Much Does D&O Insurance Cost.
Average Annual Premiums for Startups:
| Startup Stage | Est. Premium (Annual) |
|---|---|
| Seed (pre-revenue) | $1,500 – $5,000 |
| Series A-B | $5,000 – $10,000 |
| Series C+ / Pre-IPO | $10,000 – $50,000+ |
| Public companies | $100K+ (high risk & regulatory exposure) |
💡 Costs depend on:
- Company size and revenue
- Funding stage and capital raised
- Number of executives covered
- Industry risk (e.g., FinTech, AI, healthtech = higher risk)
- Claims history
Top Providers for D&O Insurance for Startups.
| Provider | Highlights |
|---|---|
| Embroker | Specializes in tech startup coverage (quick quotes online) |
| Founder Shield | Focus on VC-backed companies with custom D&O packages |
| Vouch | Built for startups; streamlined process via integrations with AngelList |
| NEXT Insurance | Small business-friendly, growing in tech space |
| Chubb / Travelers / AXA XL | Large, established carriers with customizable options |
Should a Startup Buy D&O Insurance.
✅ Ideal Triggers:
- Before raising Series A (investors often require it)
- When bringing on independent board members
- Before launching to the public or accepting customer payments
- When signing contracts with large enterprise clients
- If hiring full-time employees or offering equity
❗Many VCs will mandate D&O coverage before funding closes.
How to Choose the Right D&O Policy
Key Considerations:
| Factor | Tip |
|---|---|
| Policy limits | Start with $1M–$2M coverage; increase as you grow |
| Retention (deductible) | Know how much the company pays out-of-pocket first |
| Prior acts coverage | Ensure it covers wrongful acts before policy start date |
| Entity vs. individual | Make sure both are protected (Sides A, B & C) |
| Claims-made basis | Ensure continuous coverage to avoid coverage gaps |
D&O vs. Other Startup Insurance Policies
| Insurance Type | Covers |
|---|---|
| D&O | Leadership decisions & lawsuits |
| E&O (Errors & Omissions) | Service/product failures |
| Cyber Liability | Data breaches, cyberattacks |
| General Liability | Physical injuries, property damage |
| Employment Practices Liability (EPLI) | HR-related claims (harassment, discrimination) |
Real Startup.
Company: SaaS-based AI startup
Funding: $8M Series A
Team: 3 founders + 2 advisors
Scenario: An investor sues for misrepresentation after product fails to meet expectations.
D&O Insurance:
- Covers $250,000 in legal defense
- Settles claim for $400,000
- Protects founders’ personal assets from being seized.