D&O insurance is not a formality you sign the week before your Series A closes. It is a checklist with a hard deadline attached, because the policy only covers decisions made after the date you bind it. Miss that window and every board vote, hire, and investor update you've made up to that point is uninsured, permanently.
Here is the exact checklist to run, in order, before you sit down with a broker.
Confirm you need ABC coverage, not just Side A
Directors and officers policies are split into three sides, and most first-time buyers only ask about one of them.
Side A pays directors and officers directly when the company can't or won't indemnify them, usually because it's insolvent or legally barred from doing so. Side B reimburses the company after it indemnifies you. Side C covers the entity itself, mostly for securities-related claims that name the company alongside its officers.
Startups almost always need all three. Side C matters more than founders expect: if an investor sues over a down round or a misrepresentation in a financing round, the claim usually names the company and the officers together, and Side C is what keeps that from draining the same limit meant to protect you personally.
Check the retroactive date before you check the premium
This is the mistake that costs the most and gets caught the least. A D&O policy's retroactive date determines how far back coverage reaches. If you bind a policy today with today's date as the retroactive date, a claim filed next year over a board decision made last year is not covered, even though the policy was active when the claim landed.
If your company has operated for two years without a policy, every decision from those two years is exposed until you negotiate a retroactive date that reaches back to your incorporation. Ask for it explicitly. Brokers don't always offer it unprompted, and it typically costs little to nothing extra if your claims history is clean.
Size the limit to your stage, not your gut
Coverage limits should track funding stage, not a round number that sounds safe.
- Pre-seed to seed: $1M-$2M limit, $2,500-$6,000 annual premium
- Series A: $1M-$3M limit, $5,000-$10,000 annual premium
- Series B and beyond: $5M-$10M limit, $10,000-$25,000 annual premium
Most institutional VCs will require a minimum of $3M-$5M within 60-90 days of closing a financing round, so check your term sheet before you shop. Buying under that number just means you'll be back at the broker's desk in two months anyway.
Defense costs are the number founders underestimate. D&O litigation runs $500-$1,000 per hour for legal defense, and these are wasting policies, meaning every dollar spent on defense comes out of the same limit that would otherwise pay a settlement. A routine employment claim alone can generate $100,000-$300,000 in defense costs before any judgment is even discussed.
Read the exclusions before you read the price
Two exclusions quietly gut coverage more often than any other line in the policy.
- Major shareholder exclusion. Some carriers offer a lower premium by excluding any officer or director who owns more than a set percentage of the company, often 10-15%. For a founder-CEO who still holds a large stake, this can mean the policy doesn't cover the person most likely to be named in a suit.
- Non-rescindable Side A. Confirm Side A coverage can't be rescinded after the fact if the carrier later claims something in your application was inaccurate. Without this, a clerical error on the application months earlier can void the one part of the policy meant to protect you personally.
Get the board minutes right
Approval needs to be documented, not just verbal. A clean minute entry looks like this:
Resolved: Company to bind D&O insurance at $[X] aggregate limit with Side A/B/C coverage, retention of $[X], retroactive date of [incorporation date], authority delegated to the CEO/CFO to finalize terms with the approved broker.
Attach the actual indemnification agreement to the minutes, not just a reference to it. This is the document a plaintiff's attorney will ask for first if a dispute ever reaches the point of testing what the board actually approved.
What to do this week
The application itself takes 15-20 minutes for a standard startup profile, and most carriers return a quote same-day. There's no reason to start this the week your term sheet arrives. Pull your cap table, your last two board decks, and your incorporation date, then get three quotes from brokers who work specifically with venture-backed startups rather than general commercial insurers. Compare the exclusions before you compare the price.
Frequently asked questions
Do I need D&O insurance before I raise a priced round?
Not legally, but most seed-stage companies with outside board members or angel investors already carry some exposure. If your board includes anyone outside the founding team, get quotes now rather than waiting for a term sheet deadline.
What happens if I skip D&O insurance entirely?
Directors and officers are personally liable for breaches of fiduciary duty, and personal assets are exposed in a suit with no policy behind it. Indemnification from the company only helps if the company has the cash to pay, which is exactly when it usually doesn't.
Can I get a retroactive date that covers my company's full history?
Often yes, especially with a clean claims history and no known disputes. It's a negotiating point, not a fixed term, so ask for it rather than accepting the carrier's default of the bind date.
How much does the major shareholder exclusion actually save?
It varies by carrier, but the discount is rarely worth it for a founder who holds a meaningful stake, since that's precisely the person a plaintiff is most likely to name.
Should I buy D&O insurance from the same broker as my general liability policy?
Only if that broker has specific venture-backed startup experience. D&O is a specialized product, and a generalist commercial broker is less likely to catch the retroactive date and exclusion issues that matter most here.