How much D&O cover does a startup need?

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

Directors' and officers' (D&O) insurance is one of those covers founders rarely think about until an investor asks for it — usually as a condition of a funding round. Then the question lands quickly: how much cover do we actually need? It is a fair question with an unsatisfying honest answer, which is that it depends. But "it depends" is not a shrug. There is a clear, logical way to reason your way to a sensible limit, and this page walks you through it stage by stage so you can have an informed conversation rather than accepting the first number you are handed.

First, what is the D&O limit actually protecting?

D&O insurance responds when a director or officer is personally pursued for an alleged wrongful act in how they ran the company — a decision, an omission, a statement, a breach of duty. The claim can come from investors, employees, regulators, creditors, competitors or the company itself. Crucially, directors' liability in the UK is personal and can extend to their own assets, which is why the cover exists at all. The "limit of indemnity" is the maximum the policy will pay out across the covered claims in a policy period, and it typically has to stretch across both the cost of defending a matter and any settlement or award.

That last point is the one founders most often underestimate. Legal defence costs alone — for a drawn-out regulatory enquiry or a shareholder dispute — can be substantial before anyone has been found to have done anything wrong. When you size a limit, you are really asking: if the worst plausible dispute for a company like ours ran its full course, would this limit realistically cover the defence and any resolution, or would it be exhausted halfway through? If you want the mechanics of what the cover does and does not include, our companion guide on directors' and officers' insurance explained goes into the detail.

Is D&O a legal requirement for a startup?

No — and this is an important distinction. D&O insurance is not a statutory or legal requirement. You will not be fined or shut down for going without it. What makes it feel compulsory is that investors very commonly require it as a condition of investing, most often from Series A onwards. The obligation, in other words, is contractual rather than legal: it usually lives in your term sheet, subscription agreement or shareholders' agreement, not in an Act of Parliament.

It is worth being precise here because founders sometimes lump all their "required" insurances together. The cover that is a legal requirement is employers' liability insurance, which you must hold once you employ staff under the Employers' Liability (Compulsory Insurance) Act 1969, subject to a few narrow exceptions. Going without that where it is required carries real penalties. D&O sits in a different bucket: strongly advisable, frequently demanded by the people writing your cheques, but not mandated by law.

What actually drives the limit you need?

Instead of thinking in terms of a fixed figure per funding round — which does not reflect how real risk works — it is far more useful to look at the specific factors that push a sensible limit up or down. A pre-seed company with a UK-only footprint and two directors sits in a very different place from a Series B fintech with US investors and a regulated product, even if headline revenue looks similar. Here are the levers that matter most.

• How much you have raised. The more capital sitting on your cap table, the larger the pool of investors who could, in an adverse scenario, allege they were misled about performance, prospects or disclosures. A bigger raise generally argues for a bigger limit because the potential scale of a dispute scales with the money at stake.
• Your sector and regulatory exposure. A regulated business — fintech, health, insurance, anything touching financial promotions or sensitive data — carries a heavier tail of potential regulatory scrutiny, and defending a regulator's enquiry can be expensive. Sectors with lighter oversight typically warrant a more modest limit for the same size of company.
• Any US linkage. US investors, a US subsidiary, US customers or a US listing ambition all raise the risk profile meaningfully. The US litigation environment is more claims-heavy and more costly, and cover can need to be structured to reflect that. If you have any US thread, flag it early — it changes both the limit conversation and how the policy is arranged.
• Board size and composition. More directors and officers means more individuals who share the same limit. Bringing on investor-nominated non-executive directors — common from Series A — often sharpens the focus on cover, because those individuals will expect proper protection before they take the seat.
• An investor-specified figure. Sometimes the term sheet simply states a number. Where it does, that becomes a floor you have to meet, though it is worth understanding the reasoning behind it and whether it genuinely fits your risk or is a boilerplate figure carried over from another deal.

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

Why "match what our peers bought" is a weak approach

It is tempting to ask a founder friend what limit they took at your stage and simply mirror it. The problem is that two companies at the same headline valuation can carry wildly different risk. One might be a UK consumer app with a clean regulatory picture; the other a cross-border data business with a US anchor investor and a board full of nominees. A limit that is comfortable for the first could be thin for the second. Copying a number gives you a false sense of having done the analysis without actually having done it.

The better instinct is to reason from your own facts. Illustratively, limits are often discussed in round figures such as £1m, £5m or £10m — but treat those purely as examples of the kind of options on the table, not as a claim about what your company will need or pay. The point of naming them is only to show that the range is broad and that the right slot within it comes from your specifics, not from a table.

How the limit conversation changes as you scale

D&O is not a set-and-forget purchase. The right limit at Series A is unlikely to still be the right limit at Series C, because almost every factor above moves as you grow. Each new round adds investors and, usually, new contractual expectations. You may expand internationally, add a US entity, take on a regulated permission, or grow the board. Any of these can justify revisiting the limit — which is why founders who treat cover as something to review at every raise, rather than something bought once and forgotten, tend to avoid nasty surprises.

A practical rhythm is to reassess D&O whenever you raise, whenever you enter a new market, and whenever your board composition changes materially. Between those moments, an annual renewal review is usually enough. For a wider view of how insurance obligations evolve through the funding journey, our startup insurance by funding stage guide maps out what tends to matter when.

What about defence costs, run-off and the fine print?

Two features of D&O policies deserve a founder's attention when thinking about "how much", because they affect how far a given limit actually goes.

The first is how defence costs interact with the limit. In many policies, defence costs erode the same limit that pays any settlement — so a limit that looks generous on paper can be consumed faster than expected once lawyers are engaged. Understanding this helps you avoid setting a limit that is technically adequate but practically tight.

The second is run-off cover. If your company is acquired, winds down, or a director steps off the board, claims relating to their tenure can still surface later. Run-off arrangements extend protection for past acts after the ordinary policy ends, and this often comes up during an exit or a restructuring. The precise terms here vary and interact with your legal agreements, so it is an area to work through with a broker and, where relevant, your lawyers rather than assume the standard wording covers you.

So, how do you land on a number?

Pulling it together, sizing your D&O limit is a short, structured exercise. Start with any floor your term sheet sets. Layer on the scale of your raise and cap table. Weigh your sector and regulatory exposure. Flag any US thread honestly, because it changes the picture more than almost anything else. Account for how many people share the limit and who is on your board. Then pressure-test the resulting figure against the question: if our worst realistic dispute ran to conclusion, would this limit cover both the defence and the outcome?

That is genuinely easier to do alongside someone who has placed cover for companies like yours — which is where a broker earns their keep. The goal is a limit that satisfies your investors, protects your directors properly, and does not have you paying for cover you will never draw on. If you would rather talk it through than guess, speak to an Apex specialist and we will size it to your actual position.

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.