Should a Startup Buy D&O Insurance Before Fundraising?

Start the process early enough to review insurance requirements and provide the information the insurer requests about ownership, board structure, finances, disputes, and planned transactions. Compare the investor’s written requirement with the quote and policy, especially insured persons, company coverage, limits, claims-made dates, and any prior-knowledge exclusion. Have the broker confirm the effective date and evidence of binding before representing that coverage is in place.

Before signing, obtain the investor’s exact insurance requirement and compare it with the policy declarations, not just the broker’s proposal. Ask whether the required limit means total D&O or a specific Side A, B, or C grant, and whether entity securities coverage or particular board members must be included. The claims-made effective date and retroactive date should fit the transaction timeline; a prior-notice clause can also affect a known dispute. Verify binding with the insurer or authorized broker and retain the issued forms. A financing covenant cannot itself expand the policy beyond its wording.