Also known as: D&O · D&O insurance · directors and officers liability · management liability
Coverage that protects a company's founders, directors, and officers personally when they are sued for decisions made running the business.
Directors and Officers (D&O) insurance covers the personal liability of a company's leadership, founders, board members, and executives, for alleged wrongful acts in managing the company, such as breach of duty, misrepresentation, or mismanagement. It pays defense costs and settlements that would otherwise come out of the individuals' personal assets or the company's balance sheet. For venture-backed startups, D&O is usually the first policy investors require: most term sheets make it a closing condition, because directors joining the board want their personal exposure covered before they take the seat.
D&O insurance is a type of management-liability coverage that protects a company's directors, officers, and founders personally when they are sued for decisions made while running the business. It pays legal defense costs, settlements, and judgments arising from alleged wrongful acts such as breach of fiduciary duty, misrepresentation, or mismanagement.
When a VC partner joins your board, their personal assets become exposed to shareholder, employee, and regulatory claims against the company's leadership. D&O coverage protects them. That is why most term sheets make binding a D&O policy a condition of closing the round, with the limit sized to the financing.
D&O covers claims against the people running the company for management decisions (breach of duty, mismanagement, disclosure failures). E&O (errors and omissions, also called professional liability) covers claims that your company's product or professional service failed or caused a client a financial loss. Startups selling software or services typically need both.
It scales with stage and financing. Seed-stage companies often start with $1M to $2M; a Series A commonly warrants $3M to $5M, with investors specifying the limit in the term sheet. The right limit depends on your board composition, capital raised, headcount, and regulatory exposure; a broker sizes it to your round.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.