Serving as a director or officer comes with big responsibilities—and sometimes, big risks. Whether you’re running a business, sitting on a nonprofit board, or helping guide an organization’s future, decisions made at the leadership level can open the door to lawsuits, even when everyone’s intentions are good. That’s where Directors & Officers (D&O) Insurance comes in.
Directors & Officers insurance is designed to protect the people behind the organization—your directors, officers, and in many cases the organization itself—if claims arise from decisions made while managing or governing the company.
What kinds of claims can happen?
Directors & Officers claims can come from many different directions. Some are business-related, like allegations of mismanagement, conflicts of interest, or failing to follow bylaws or corporate governance rules. Even when a claim has no merit, defending it can be expensive—and stressful.
Why Directors & Officers insurance matters
One of the biggest benefits of Directors & Officers coverage is help with legal defense costs. Attorney fees, court costs, settlements, and judgments can add up quickly. Without coverage, those costs could impact the organization’s finances—or worse, the personal assets of its leadership.
Directors & Officers insurance allows leaders to focus on making thoughtful decisions without constantly worrying about personal financial exposure.
Directors & Officers policies are typically broken into three agreements
- Agreement or Side A – Insured Persons
- Covers individual directors and officers if the organization can’t legally or financially cover them.
- Agreement or Side B – Indemnification
- Reimburses the organization when it does cover legal costs for its directors and officers.
- Agreement or Side C – Organization
- Protects the organization itself for certain claims tied to management decisions
Common D&O Sub-limits
- Investigative Costs
- Limit for costs related to a formal inquiry or investigation by a regulatory or government body
- Excess Benefit Transaction Tax
- Specialized coverage that pays for the excise taxes imposed by the IRS on board members and managers under Section 4958 of the Internal Revenue Code.
Optional D&O Coverages
- Additional Defense
- Provides additional limits of insurance dedicated to the payment of defense cost only
- Excess Side A
- Provides an additional limit of liability for insured persons
- Employed Lawyers Professional Liability
- Covers claims arising from legal services provided by the insured’s employed lawyers
Common D&O Limits
$1 Million is the most common limit for Directors & Officers without any optional coverage but every organization is different. We suggest reviewing your limits and coverage’s with your insurance professional to evaluate and determine the right level of coverage for your insurance.
Who needs Directors & Officers Insurance?
In today’s litigious society, unfortunately almost every organization should have a D&O policy.
Non-Profit Organizations
For nonprofits, Directors & Officers insurance is often essential. Board members frequently serve on a volunteer basis, but that doesn’t stop them from being named personally in a lawsuit. Having Directors & Officers coverage helps protect personal assets, makes it easier to recruit and retain board members, and shows donors and grant providers that the organization takes responsible governance seriously.
Privately Held Companies
Privately held companies and growing organizations also benefit greatly from Directors & Officers insurance—especially during times of change like expansion, mergers, leadership transitions, or increased regulatory scrutiny. In many cases, lenders, investors, or partners may even require D&O coverage as part of an agreement.
What Directors & Officers insurance doesn’t cover
Like any insurance policy, D&O coverage has limits. It typically does not cover fraudulent, criminal, or intentionally dishonest acts. Claims involving bodily injury or property damage are also excluded and are usually handled by other types of insurance.
The Bottom Line
Directors & Officers insurance helps protect the people making tough calls. It supports confident leadership, financial stability, and peace of mind, so directors and officers can focus on guiding their organization forward instead of worrying about what could go wrong