D&O Insurance for Startups: Questions Before a Funding Round
Directors and officers insurance addresses certain claims alleging wrongful acts in managing a company. For a startup approaching a funding round or adding a board member, the review should connect the financing requirements, insured people and entities, policy limits and exclusions. D&O does not replace technology E&O, cyber or employment practices coverage.
By Atlas Risk Partners · Updated
Start with the financing documents and board changes
Tell your broker the expected closing date, whether investors have specified insurance requirements, and who is joining the board. Share the relevant language instead of relying on a verbal shorthand such as standard D&O.
A first purchase and a renewal raise different questions. For a first policy, establish the relevant history and prior-knowledge disclosures. At renewal, identify changes in ownership, finances, governance or transactions before treating last year's program as the default.
Understand who each section protects
D&O programs commonly distinguish coverage for insured individuals when the company cannot indemnify them, reimbursement to the company for indemnification, and a section covering specified claims against the company. The scope depends on the form and whether the company is private or public.
Ask the broker to walk through the actual insured-person definition, company coverage and allocation provisions. Do not infer that a policy named D&O covers every dispute involving a director.
Questions for the quotation review
- Who qualifies as an insured person, including former directors and officers?
- What company claims are included, and what is excluded?
- Are defense costs inside the limit?
- Which retentions apply to the different coverage sections?
- How do prior claims, pending litigation and known circumstances affect the proposal?
- What happens after a change in control, acquisition or public offering?
- How does the program coordinate with EPLI and other management liability coverage?
Prepare the underwriting information
Gather current financial information, capitalization and ownership details, board composition, a description of the round or transaction, and existing insurance if applicable. Label forecasts clearly and describe material disputes accurately. The insurer's application determines the exact information and attestations required.
Ask Atlas to connect the terms in the quote to the requirements on your closing checklist, and to identify the remaining steps before coverage can be bound.
Common questions
Is D&O only for public companies?
No. Private companies can also face claims involving management decisions. Whether a startup should buy it, and on what terms, depends on its circumstances, financing requirements and available policy forms.
Does D&O cover a software product failure?
Do not assume it does. Technology E&O is the line to discuss for allegations that a technology product or service caused customer financial loss. D&O addresses a different category of management exposure.
Sources and editorial approach
Atlas publishes these guides for general education. We use public regulatory and insurer materials for background and link them below. An insurer’s example describes its own product; it is not an Atlas appointment or coverage promise. Your policy and endorsements determine actual coverage.
- Travelers: Directors & Officers Liability Insurance
Background on D&O protection; descriptions of a specific insurer's products do not establish the terms of another policy.
For a correction or a question about your business, contact Atlas.
