What drives the cost of D&O insurance for startups?

Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-06

Directors' & Officers' (D&O) insurance protects the personal liability of your founders, directors and senior officers when decisions they take in running the company are challenged. For a venture-backed startup, it usually appears on the agenda at the same moment your term sheet does: many lead investors expect a D&O policy in place as a condition of the round, typically from Series A onward. So the natural next question is "what will it cost?" — and the honest answer is that there is no sticker price. What there is, is a set of factors every underwriter looks at, and the good news is that most of them are things you can understand and, in part, influence.

This page walks through those factors for a startup specifically. We won't quote premiums — anyone who gives you a firm number without seeing your business is guessing — but by the end you'll know exactly what an underwriter is weighing when they price your cover, and why two startups that raised the same amount can be quoted very differently.

Why there's no single "startup D&O price"

D&O is management liability cover, and management liability is inherently bespoke. The premium reflects the underwriter's view of how likely a claim is against your directors, how expensive that claim could get to defend, and how much cover you're asking them to stand behind. A pre-seed team of two building developer tooling and a Series B fintech with a US subsidiary present completely different risk pictures — even if both call themselves "an early-stage tech startup."

That's why the same policy limit can carry very different premiums, and why the sensible move is a tailored quote based on your actual numbers rather than a benchmark you found in a forum. The factors below are what a broker like us puts in front of the market on your behalf.

How does funding stage affect the price?

Your funding stage is one of the first things an underwriter reads, and it works on the premium from two directions at once. As you raise more, you generally need a higher limit of indemnity — a Series B company with institutional investors and a bigger balance sheet has more at stake than a pre-seed team — and a higher limit costs more in absolute terms. At the same time, later-stage companies are more visible, have more counterparties, employ more people and make bigger commercial decisions, so the underlying likelihood of a claim tends to rise with maturity.

The amount you've raised matters as a signal too. It tells the underwriter the scale you're operating at, the expectations investors now have of your board, and how far a disgruntled shareholder might reach if a decision goes badly. None of this means raising more is "bad" for your premium — it simply means the cover has to grow with you, which is exactly why founders review their D&O at each round rather than setting it once and forgetting it. If you want the broader picture of what the policy actually does, our guide to D&O insurance explained is a good companion to this page.

Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.

Does my sector change what I pay?

Considerably. Underwriters price sectors according to how litigious and how regulated they are. A company operating in a heavily regulated field — financial services, healthcare, anything handling large volumes of personal data, or a business whose model attracts regulator attention — presents more ways for a director to end up on the wrong end of an investigation or claim. That regulatory exposure feeds directly into the premium.

A few sector-linked things underwriters tend to probe:

• Whether you operate in a licensed or authorised activity, and whether you hold the right permissions.
• How much personal or sensitive data you process, and your data-protection posture.
• Whether your product makes claims — clinical, financial, environmental — that could be challenged.
• How new or fast-moving your area is; genuinely novel models can carry more uncertainty for an underwriter.

This is also why it's worth describing your business precisely in your proposal. "Software" covers a payroll platform holding client money and a scheduling app, and those are not the same risk. A broker's job is partly to translate what you do into terms the market understands so you're priced on your actual risk, not a worst-case assumption.

Why does US exposure matter so much?

If there's one factor that moves a startup's D&O premium more than founders expect, it's exposure to the United States — and it's genuinely, not artificially, a bigger risk. The US has a far more active shareholder-litigation culture than the UK, class actions are more common, and defence costs run high. Because D&O responds to claims against your directors, any route that lets a US-based party bring a claim materially increases the exposure the underwriter is taking on.

US exposure shows up in more ways than founders sometimes realise:

• US operations — a US subsidiary, US employees, an office or customers in the States.
• A US-linked cap table — US venture funds or angels among your investors. US shareholders can bring US-style claims if they feel a board decision harmed the value of their stake, which is precisely the kind of litigation US courts see most.
• US fundraising — raising capital under US securities rules, or plans to.
• Listings or ambitions — any path toward a US listing sharply raises the stakes.

So a UK startup that took a large cheque from a Californian fund can be quoted very differently from an otherwise identical company backed entirely by UK and European investors. If that's you, it's worth flagging early — it changes both the price and the wording, and it's exactly the sort of nuance where a conversation beats a self-serve form. You can speak to an Apex specialist about how your cap table and territory affect your cover.

How do financial health and runway feed in?

Underwriters look closely at the financial picture of an early-stage company, because a large share of D&O claims cluster around financial distress. When money runs short, that's when shareholder disputes, creditor actions and insolvency-related claims against directors are most likely to surface. So your runway, your burn rate, your latest accounts and the strength of your balance sheet all inform how an underwriter prices — and occasionally whether they'll offer terms at all.

A healthy runway and a credible path to your next raise read as lower risk. A short runway with no clear funding line reads as higher risk, because the scenarios D&O is built to respond to become more plausible. This isn't a judgement on your business; it's the underwriter pricing the probability of the specific claims the policy covers. Presenting your financials clearly and in context — especially if a recent number looks worse than the trajectory — is one of the most useful things a broker does when placing startup D&O.

Board composition, governance and claims history

Who sits on your board and how you govern the company both matter. A board with experienced non-executive or investor directors, clear decision-making and proper minuted governance generally presents as a lower risk than a founder-only board making major decisions informally. Underwriters also look at your claims and circumstances history — any prior D&O claims, regulatory investigations, or matters that could reasonably give rise to a claim. A clean history helps; an undisclosed issue is far worse than a disclosed one, so full and accurate disclosure is essential.

The limit of indemnity you choose is the other lever. Higher limits — you'll see options such as £1m, £5m or £10m discussed as illustrations — naturally cost more, and the right level depends on your stage, your investors' expectations and any specific requirement written into your term sheet. This is a judgement to make deliberately rather than defaulting to the cheapest option, because being underinsured defeats the purpose of holding the cover at all. It also sits alongside the other management-liability and business covers you'll accumulate as you scale, which we cover in our startup insurance guide.

Which UK business covers are compulsory, and on what authority

D&O is not a statutory requirement for a UK startup, unlike one of the covers in the table below.

Sources: Employers’ Liability (Compulsory Insurance) Regulations 1998 reg 3 (legislation.gov.uk); Companies Act 2006 s.233 (legislation.gov.uk); SRA Minimum Terms and Conditions (sra.org.uk); ARB PII Guidance (arb.org.uk). Sector-specific statutory requirements may apply in addition.

Is D&O legally required?

No — this is a common misunderstanding worth clearing up, because it changes how you should think about the cost. D&O is not a legal or statutory requirement. What makes it feel mandatory is that investors commonly require it: it's frequently written into term sheets as a condition of investment, typically from Series A, because your investors want your directors protected (and their board seats covered). So the pressure to buy is commercial, not legal.

Companies Act 2006 s.233 provides that the prohibition on provisions indemnifying directors does not prevent a company from purchasing and maintaining insurance for a director against such liability.

The insurance that is legally required is different: once you employ staff, Employers' Liability insurance is compulsory under the Employers' Liability (Compulsory Insurance) Act 1969, with only narrow exceptions, and operating without it where required can expose you to penalties. Keeping the two straight matters — D&O protects your directors personally by investor expectation; Employers' Liability protects your employees' claims against the business by law. A tailored quote should reflect where you genuinely stand on both.

How do I get an accurate figure for my startup?

Because every one of the factors above is specific to you, the only reliable way to know your cost is a quote based on your real details: your stage and amount raised, your sector, your financials and runway, your territory and cap table, your board and your claims history, and the limit you need. That's a short conversation and a proposal form, not a guessing game — and it's exactly where a broker earns their keep, by presenting your risk to the right insurers in the right way so you're priced fairly and worded correctly.

If a term sheet has put D&O on your to-do list, or you simply want to understand where you'd land before your next round, that's what we're here for.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This article is general information, not advice on a specific policy or a recommendation to buy any product.