Directors' and officers' (D&O) insurance explained

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-06

What is D&O insurance, in plain English?

When you become a director or officer of a company, you take on personal legal responsibilities that don't disappear behind the corporate structure. If someone believes you got a decision wrong — a shareholder who feels misled, an employee who alleges they were treated unfairly, a regulator investigating how the business was run — they can pursue you, by name, not just the company. Directors' and officers' liability insurance exists to sit between that claim and your own house, savings and reputation.

Concretely, D&O responds to claims made against individuals for what insurers call "wrongful acts" in their capacity as a director, officer or senior manager: an actual or alleged breach of duty, error, misleading statement, neglect or similar. It pays the legal costs of defending the allegation and, where it applies, any settlement or damages award. Defence costs alone can be significant and can run for months or years, which is why the cover matters even when a claim ultimately goes nowhere.

It is worth being precise about what D&O is not. It is not health and safety cover, it is not cover for the company's contractual performance, and it is not a substitute for the compulsory and operational policies a growing business needs alongside it. It is specifically about the personal exposure of the people steering the company — and, as we'll see, the company itself in defined situations.

Who does D&O insurance actually protect?

People often assume D&O only protects the founders on the board. In practice a good policy reaches wider than that. Typically it covers:

• Individual directors — executive and, where you have them, non-executive directors, including investor-appointed board members.
• Officers and senior managers — people with genuine managerial responsibility, such as a head of finance or operations, even if they don't hold a formal board seat.
• The company itself, but only for certain kinds of claim (more on this in the Side A/B/C section below).
• Former, current and future directors and officers, so someone who has since left isn't stranded when a claim about their tenure surfaces later.

This breadth matters for startups specifically. Founders wear several hats, non-executive directors are often a condition of taking investment, and senior hires are frequently making consequential decisions before any formal governance is tidy. D&O is designed to follow the responsibility, not just the job title.

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

What are Side A, Side B and Side C cover?

D&O policies are usually described in three parts — Side A, Side B and Side C. The labels sound technical, but the idea behind them is straightforward once you see who each part is really for.

Side A protects the individual when the company can't step in. Normally a company will indemnify its directors — meaning it agrees to cover their costs if they're pursued for doing their job. But there are situations where it legally can't or practically won't: the company is insolvent and has no money, or the law prevents indemnification for a particular type of claim. Side A responds directly to the director in those moments, paying on their behalf so the exposure doesn't land on their personal assets. For founders and non-executives, this is the part of the policy that protects you when everything else has fallen away.

Side B reimburses the company when it has indemnified a director. When the company does step in and covers a director's costs, Side B pays the company back for that spend. It protects the balance sheet from the cost of standing behind its people, which for an early-stage business with limited cash can be just as important as protecting the individuals.

Side C covers the company itself for certain claims made against the entity. This is often called "entity cover". Its scope depends heavily on the policy and the type of company — for private companies it is commonly limited to particular categories of claim rather than being open-ended. Because the detail varies between insurers and wordings, this is exactly the sort of thing worth talking through rather than assuming, so the cover matches how your company is actually structured and where its real exposures sit.

The practical takeaway: Side A is about protecting people, Side B is about protecting the company's cash when it backs those people, and Side C is about protecting the company when it is sued in its own name. A well-built policy balances all three for your stage and circumstances.

Where do D&O claims actually come from?

For a growth company, the claim sources that matter are rarely dramatic courtroom scandals. They're the everyday friction that comes with taking on money, hiring people and competing hard. The most common sources include:

• Shareholders and investors — allegations that directors misrepresented the company's position, breached their duties, mismanaged funds, or acted against the interests of minority shareholders. As your cap table grows, so does the number of people with standing to complain.
• Employees — claims connected to how the business was managed, such as alleged discrimination, unfair treatment or wrongful dismissal, where a director is named alongside or instead of the company.
• Regulators and official bodies — investigations and enforcement action, where even responding to an inquiry generates substantial legal cost regardless of the eventual outcome.
• Creditors — particularly where a company is heading towards or entering insolvency, when directors' conduct comes under close scrutiny and personal claims become far more likely.
• Competitors and other third parties — disputes over alleged poaching of staff, misuse of confidential information, or misleading statements made in the course of doing business.

Notice how many of these scale directly with growth. Raising money adds investors. Hiring adds employment exposure. Winning adds competitors who'd rather you didn't. The riskiest period for a director is often not the quiet early days but the fast, funded, hiring-hard phase — which is precisely when D&O tends to get taken seriously.

Do private companies really need D&O, or just listed ones?

This is the single biggest misconception we hear from founders. D&O has a reputation as something for FTSE boards and public companies with prospectuses and analysts. In reality, private companies — including early-stage, venture-backed startups — carry very real director exposure, and in some respects a private company director is more exposed, because there's rarely a deep corporate balance sheet or established indemnification machinery to fall back on.

A director's legal duties don't switch on at IPO. They apply from the moment you're appointed to a private limited company. An investor who feels misled, an employee with an employment claim, a regulator with questions, a creditor in a downturn — none of these require your shares to be publicly traded. If anything, the concentrated ownership and rapid change typical of startups create more opportunities for disputes between the people involved, not fewer.

There's also a simple commercial reality: your future board members will expect it. Experienced non-executive directors and investor-appointed directors frequently won't take a seat without D&O in place, because they are being asked to accept personal liability for a company they don't run day to day. Having cover ready signals that you take governance seriously and makes it easier to attract the calibre of board you want.

Is D&O insurance legally required?

No. D&O insurance is not a legal or statutory requirement in the UK. You will not be breaking the law by trading without it. What actually drives most startups to buy it is investor expectation: it is very commonly written into term sheets as a condition of investment, typically from around Series A, and sometimes earlier. In other words, the pressure to have D&O usually arrives with the money, not with the regulator.

It's worth drawing a clear line here, because founders often blur the two. The insurance the law does compel is different. Under the Employers' Liability (Compulsory Insurance) Act 1969, once you employ staff you are generally required to hold employers' liability insurance, subject to narrow exceptions, and failing to do so can carry penalties. That is a genuine legal obligation. D&O is not in that category — it is protection you choose (or your investors ask you to choose) because the exposure is real, not because a statute demands it.

If you'd like the fuller picture of which covers are compulsory, which are contractually expected and which are simply sensible, our startup insurance guide maps them against funding stage, and our overview of employers' liability insurance covers the one you're legally obliged to hold once you hire.

How much cover do you need, and what shapes the price?

There's no single correct limit of indemnity. The right level depends on your circumstances — how much you've raised, how many shareholders and employees you have, the sectors and regions you operate in, and what your investors specifically require. Illustratively, companies choose limits such as £1m, £5m or £10m, but these are options to weigh against your own risk profile, not a benchmark of what any particular business will need or pay.

On price, the honest answer is that premiums are individually assessed and we'd rather quote your company than a generic figure. The factors that tend to move a D&O premium include the limit you choose, your funding stage and amount raised, your industry and regulatory environment, headcount, where you trade, your financial position, and your claims history. Because these interact, two superficially similar startups can price quite differently — which is exactly why a conversation beats a self-serve estimate here.

When should a startup put D&O in place?

Two moments tend to trigger it. The first is a term sheet that names D&O as a condition — at which point you'll want cover bound before completion, so it's worth starting the conversation as soon as the requirement appears rather than in the final scramble to close. The second is quieter: the point at which you've taken on outside shareholders, hired a team and started making decisions with real financial consequences. If a mistake in the boardroom could now genuinely land on a founder's personal finances, the exposure already exists whether or not an investor has asked about it.

Our general advice to founders is to treat D&O as part of getting investment-ready rather than an afterthought. Having it lined up removes a last-minute obstacle to closing a round, reassures incoming directors, and — most importantly — means the people building the company aren't personally exposed during its most eventful, highest-risk phase. If you're mapping cover across your funding journey, it sits naturally alongside the other policies in our Series A insurance checklist.

Whenever the question of D&O comes up for you, we're happy to talk it through in plain terms — what the cover does, what your investors are likely to want, and how to structure it sensibly for where you are. You can start a tailored quote here or speak to a specialist first.

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.