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What Is Directors and Officers Insurance?

Directors and officers insurance can help pay for covered claims against company leaders over decisions they make in running the business.

What Does Directors and Officers Insurance Cover?

Directors and officers liability insurance addresses covered claims alleging wrongful acts in managing an organization. 1

The Costs of a Covered Claim

Covered D&O losses can include legal defense costs, settlements and judgments. 1

Individuals and the Company

Indemnification means the company pays on a leader's behalf. D&O can protect the individual when the company doesn't indemnify them, reimburse the company when it does, and cover specified claims against the company itself. Confirm which of those protections you've bought; they can have different terms. 3,4 3,4

Coverage questionWhat to clarify
The company does not indemnify an individualWhat protection is proposed for that person’s covered loss?
The company indemnifies an individualWhat reimbursement protection is proposed for the organization?
A claim names the company itselfWhich kinds of company claims does the coverage grant address?
3,4

Who Needs Directors and Officers Insurance?

Consider D&O when reviewing protection for your board and management, particularly around financing, ownership changes or a major transaction. 5

Coverage Examples

These are examples, not coverage guarantees. Your policy terms and the facts of the claim determine what is covered.

What happened

Investors Sue the Board

Investors allege that your board misrepresented the business during a funding round.

How coverage may help

D&O may pay defense costs and covered damages for the directors. Which part responds depends in part on whether the company pays those costs on their behalf. 1,3,4,2

What happened

The Lawsuit Names the Company Too

A lawsuit names your executives and the company, and both need legal representation.

How coverage may help

Company coverage can be narrower than protection for individual leaders. If defense costs count against the limit, legal bills also reduce the amount left for a settlement. 1,3,4

How Do You Compare Coverage and Costs?

The Scope of Company Coverage

Check the scope of company coverage carefully: a grant limited to securities claims is different from broader coverage for claims alleging company wrongful acts. 3,4

Defense Expenses and Retentions

Ask whether defense expenses reduce the limit available to pay a settlement or judgment and which retention applies. 4

What Exclusions and Conditions Should You Check?

Earlier Disputes and Reporting

Compare when a claim must be made and reported, and ask how earlier disputes or notices affect a new or renewal policy. 3

Changes at Renewal

Review exclusions and changes at renewal instead of assuming the policy title describes every claim it will cover. 2

How Does It Compare With Related Coverage?

Professional Liability

Professional liability concerns claims about services or advice; D&O concerns covered allegations about management decisions. 1

Employment Practices Liability

Employment practices liability addresses employment-related claims; check that coverage separately when reviewing a management-liability program. 1

What Do You Need for a Quote?

Prepare an ownership and entity overview, financial information, details of planned transactions, and a history of claims or disputes to discuss with the broker. 5

Ownership, Finances and Planned Changes

PrepareHow to use it in the discussion
Entity and ownership overviewIdentify the organization and relationships you want considered.
Financial informationGive the broker context for the proposed coverage.
Planned transactionsExplain changes the business is contemplating.
Claims, disputes and earlier noticesDiscuss the timing and prior-matters provisions.
Current coverage, where applicableCompare renewal changes and the proposed grants.
5 3 2

Key Terms in Plain English

Individual and Reimbursement Protection

Direct protection when the company cannot pay on a leader’s behalf, or reimbursement when it does. 3,4

Entity Coverage

Protection for the company itself. A securities-only grant is different from broader company wrongful-act coverage. 3,4

A Policy Example to Compare

See Corgi's guide for an example of one provider's coverage terms and optional extensions.

Frequently Asked Questions

Does D&O Cover the Company as Well as Its Leaders?

It can, but company coverage may be narrower than protection for individual leaders. Some grants address only securities claims; others cover broader company wrongful-act allegations. 3,4

Does D&O Replace Employment Practices Coverage?

Don't rely on D&O alone for employment claims. Confirm whether your management-liability program includes EPLI and what that part covers. 1

Can D&O Insurance Pay Legal Defense Costs?

Covered D&O losses can include legal defense costs as well as settlements and judgments. Read the offered terms to see which costs fall within the protection you are buying. 1

What Should I Check When Renewing D&O Insurance?

Review the exclusions and any changes from the expiring policy. The D&O label alone does not tell you which management-related claims remain covered after renewal. 2

Which Insurance Providers Offer Directors and officers?

Sources

  1. Glossary of Business Insurance Terms. The Hartford; Directors and Officers Liability Insurance; Errors and Omissions Insurance; Employment Practices Liability Insurance. Accessed 2026-09-16.
  2. SR 19-12: Statement Regarding Insurance Policies for Directors and Officers. Board of Governors of the Federal Reserve System; Statement on exclusionary language and review. Version: July 23, 2019. Accessed 2026-09-16.
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Updated .

Sources checked .

Spot, a product of Tools for Enlightenment, publishes this research and works in the commercial insurance market. Editorial policy. To suggest a correction, contact Spot with the page URL and supporting source.

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