D&O Insurance for Startups: What Should Founders Know?

Founders should map who will be an insured person, which corporate entities need coverage, and whether investors or outside directors require particular terms. A policy written before a financing may need updating when the company changes its ownership, board, or operations. Confirm the application’s questions with the broker and disclose material facts; the insurer uses the submitted information to evaluate the risk. Compare Side A, B, and entity coverage, claims-made dates, prior notice, limits, and exclusions. Investor diligence requests should be matched against the actual policy rather than a certificate alone.

In a startup, compare what the cap table, charter, investor agreements, and board appointments require with the actual policy. Side A/B protect eligible individuals and indemnification; Side C is limited by its own grant and may not cover every investor dispute. Check whether newly formed subsidiaries or special-purpose entities are included, how a financing or acquisition affects coverage, and whether a prior dispute is excluded. Ask about the retroactive date, insured-versus-insured clause and derivative-claim exceptions, defense-cost erosion, and shared limits with EPLI. Keep the application consistent with the company’s current ownership and governance.