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Directors and Officers (D&O) Insurance

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UPDATED: Sep 23, 2013

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BoardroomDirectors and officers liability insurance, often called D&O coverage, protects the executives of a company from legal action as a result of negligence arising from their actions within the organization.  In other words, if they are sued for any action they take as a director or officer, the D&O coverage will step in to assist with legal protection.

How Does D&O Insurance Work?

D&O  insurance protects the current and future directors and officers of any for-profit or non-profit organization from suits arising from perceived or actual wrong-doing.  In a sense, D&O insurance is similar to professional liability insurance; both types of policies protect companies against lawsuits resulting from errors or misdeeds.  In the case of D&O insurance, however, the protection is meant specifically for the directors and officers rather than any other employees.

Some of the things that might be covered by D&O insurance:

  • Misleading statements, whether intentional or accidental
  • Errors and omissions
  • Breaches of duty
  • Wrongful acts

Who Needs Directors & Officers Insurance?

Any company or nonprofit organization that has a board of directors or advisers can benefit from this type of insurance.  For publicly traded companies, D&O insurance is a must-have.  Even smaller companies, including those that are privately owned, can still benefit from this coverage as long as they have the appropriate corporate structure.

Sole proprietorships, partnerships and some small businesses may not need D&O insurance.  For these companies, other types of liability insurance will probably be sufficient.  You can check with your insurer to determine what needs your business may have and ensure that you are purchasing the correct type of liability policy for your company.

How Much Does D&O Insurance Cost?

As with all liability policies, directors and officers liability premiums are affected by several factors.  Depending on the size of your company and its specific risk level, your premiums may be higher or lower than those of another business.  The best way to know how much your insurance will cost is to obtain multiple quotes from different insurance carriers.  This should provide a reasonable sample to test the cost and coverage types available.

About Eric Stauffer

Author: Eric StaufferI am a former insurance agent and banker turned consumer advocate. My priority is to help educate individuals and families about the different types of insurance they need, and assist them in finding the best place to get it.


  1. Hi, I work for a very small company that was a lot larger in the past but is now just ticking along and we have a renewal looming for our D&O policy. Our company used to have a 4 member board. We are an LLC partnership. The CEO passed away last year and two of the other board members have forfeited their shares and there is now only one member. Is this policy even necessary still as we do not have a board anymore? Any advice I can garner for the owner of the company is appreciated.


    • Hi Vanessa,

      As far as I am aware, D&O is not required for small businesses in any state (I believe).

      The purpose of D&O insurance is to cover directors and officers against personal lawsuits as it pertains to their job. For example, if an employee, stockholder, vendor, etc sued the director personally. This usually happens in conjunction with suing the company, but not always.

      Again, I am not caught up to speed on every state law as it pertains to this, but in general it should be optional.

      Eric Stauffer


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