Better How To Purchase D&o Insurance Starts Here

How to purchase D&O insurance: A 10-day, board-defensible plan

If you’re wondering how to purchase d&o insurance for a startup, this guide delivers a concrete 10‑day sprint to secure board‑ready coverage without overpaying or buying the wrong policy. Start with the outcomes you need: personal asset protection for directors (Side A), balance‑sheet protection for the company (Side B), and securities‑claim coverage for the entity (Side C). This article walks through a board‑defensible playbook to buy D&O insurance efficiently and with discipline.

Define the outcomes: Side A, Side B, and Side C

• Side A protects directors’ personal assets when the company cannot indemnify them.
• Side B reimburses the company for defense costs and settlements paid on behalf of directors.
• Side C covers entity‑level securities claims against the company.

Structure decisions should align with these outcomes and be testable against a simple Protection vs. Cash Impact framework.

Make it board-defensible: memo, RAPID, and minutes

Prepare a one‑page board memo that states why coverage is needed now, the target structure (Side A/B/C mix), the expected cost range, and the negotiation plan. Include draft resolutions authorizing the D&O purchase and any indemnification updates as pre‑reads. Circulate the memo and draft resolutions before the meeting so the board can authorize limits and retentions rather than debating definitions on bind day.

RAPID helps structure the decision:

• Recommend: CFO or GC
• Agree: Audit chair and lead investor
• Perform: CFO runs the RFP
• Input: CEO and outside counsel
• Decide: Board

For tracking and audit trails, some teams use ImBoard.ai to streamline pre‑read distribution and timestamp resolutions. See also internal resources like Board meeting templates and Startup governance guide.

Put indemnification first: charter, bylaws, resolution

Indemnification is your first layer of protection and influences carrier appetite and pricing. Ensure the charter and bylaws contain broad indemnity and advancement language “to the fullest extent permitted by law” and that advancement isn’t buried in conditional clauses. Provide template indemnification agreements and pass a board resolution authorizing advancement of expenses before marketing for D&O. Keep signed indemnification documents in your data room for underwriters.

A real‑world example shows how delays updating bylaws can raise renewal costs; clean governance documents reduce underwriting friction.

What limits, retentions, and structure should I buy by stage?

• Side A protects directors’ personal assets; Side B reimburses the company; Side C covers entity‑level securities claims.
• Use market benchmarks, verified with your broker, to scale limits by headcount, revenue, and upcoming catalysts.
• Typical ranges (illustrative; verify with broker):
  • By employee count: 1–25 ($1M–$2M), 26–100 ($2M–$5M), 101–250 ($5M–$10M)
  • By funding round: Seed ($2M–$3M), Series A ($3M–$5M), Series B ($5M–$10M)
• Retentions (illustrative): Seed/Series A ($25k–$75k), Series B/C ($100k–$250k)
• Tie coverage increases to concrete KPIs (e.g., headcount thresholds or governance changes) and verify prior‑acts dates.

Note: pricing varies by sector, jurisdiction, and insurer appetite; confirm with your broker and market surveys.

Pre‑Seed/Seed playbook: minimum protections

At pre‑seed and seed, buy the floor that protects directors without draining runway. Consider a $1M Side ABC or a Side A‑only policy if the immediate goal is director recruitment. Prioritize broad insured‑vs‑insured carve‑backs, a conduct exclusion aligned to final adjudication, and prior‑acts protection aligned to incorporation date.

Side A‑only can aid recruiting; layer on Side B/C later as you grow, typically at Series A or Series B, while preserving continuity of prior‑acts and terms when layering.

The 10-day sprint: owners, docs, timeline

Day 0 — Alignment: sponsor from finance or operations, audit chair as board sponsor, and set limits/retentions and a decision date.

Days 1–2 — RFP + underwriting prep: assemble cap table, deck, charter/bylaws, indemnification drafts, financials, product revenue, headcount, top customers, pending disputes, loss runs, org chart, and key contracts. Centralize files in a secure workspace. Some teams use ImBoard.ai to track loss runs and automate status updates to directors.

Days 3–5 — Market: select a broker and target 3–5 carriers; pre‑clear sensitive topics like convertibles, crypto exposure, or potential class actions. Circulate to internal stakeholders; reference internal playbooks and templates.

Days 6–8 — Evaluate indications and redlines: align on exclusions and retentions before chasing higher limits.

Days 9–10 — Finalize negotiations, obtain board approval, and bind; secure a specimen policy and endorsements; confirm panel counsel and change‑in‑control terms.

Expected timeline: about 10–14 calendar days from complete application to bind for small/private D&O, depending on carrier and jurisdiction. Use a lightweight RACI to keep responsibilities clear.

RACI (lite):

• Responsible: CFO runs the RFP and negotiates terms
• Accountable: CEO signs off; audit chair sponsors the board decision
• Consulted: GC and outside counsel, lead investor
• Informed: broader board and controller

Pitfall to avoid: missing loss runs from a prior broker can delay quotes by 48–72 hours; request them on Day 1.

How do I pick a broker and test carriers?

Treat broker selection like a vendor RFP: invite 2–3 brokers, require a consistent data room, and demand transparency on compensation and conflicts. Brokers should provide a written marketing plan with target carriers, proposed structures (Side ABC vs Side A), and a timeline to bind. Ask for two anonymized recent claim stories and a weekly status template.

A real scenario: a Series B fintech CEO secured a regulatory‑exclusion carve‑back and pre‑cleared panel counsel with no premium increase, illustrating the value of a proactive broker strategy.

ImBoard.ai can help streamline pre‑read distribution and provide audit trails; use it where appropriate.

Negotiate terms, not just limits

Limits are headline figures; terms determine how coverage actually pays. Priorities:

• Insured‑vs‑insured carve backs for investor‑director claims
• Conduct exclusions requiring final adjudication
• Prior‑acts alignment
• Side A payment priority
• Defense cost advancement
• Endorsements that avoid hidden contractual liability or professional‑services exclusions
• Whether “claim” covers informal investigations or formal actions only

Use a framework like ICE (Impact, Confidence, Ease) to prioritize the highest‑impact terms.

After bind: claims playbook, M&A run‑off, global footprint

Operationalize the policy: store the binder and specimen policy accessibly for legal, finance, and audit chair. Confirm pre‑approved panel counsel and whether you may use them. Budget for M&A run‑off (private company practice is often 2–3× the annual premium for a six‑year run‑off; verify with your broker). If you add non‑US subsidiaries, map local admitted requirements. When D&O is bundled with EPLI/Cyber, schedule quarterly reviews of claims and exposures.

Operational best practices:

• Trigger: GC notifies broker and counsel within 24 hours of a potential claim
• Quarterly: 30‑minute review of open matters, spend vs. retention, and material scope changes

A growth‑stage SaaS company taught the importance of timely notification when a tuck‑in acquisition risked denial; the endorsement restoration underscored the need for proactive oversight.

FAQ

For more insights on this topic, see our guide on Better Limited Liability Company Agreement Template Starts Here.

Q: What documents do I need to buy D&O insurance? A: A clean underwriting package: cap table, deck, charter/bylaws, indemnification agreements, financials, loss runs, org chart, top customers, and key contracts.

Q: How long does it take to bind D&O for a startup? A: Plan roughly 10–14 calendar days from a complete application to bind if governance is clean and the broker markets efficiently.

Q: Can I buy Side A only and add Side B/C later? A: Yes. Side A‑only is common at pre‑seed to recruit directors; layering Side B/C later is typical at Series A or B. Verify continuity of prior‑acts and terms when layering.

Q: What is an appropriate retention for a Seed‑stage startup? A: Typical retentions range from $25k–$75k. Choose a retention the company can pay without jeopardizing runway and verify with your broker.

Q: Will bundling D&O with EPLI or Cyber save money? A: Bundling can yield package credits, but it may dilute D&O terms. Always compare bundled vs. standalone terms side by side and prioritize coverage quality.

Q: How do I handle change‑in‑control language for an acquisition? A: Confirm whether the policy triggers run‑off or offers buy‑back options; budget for run‑off, typically 2–3× annual premium for a six‑year period in private companies.

Q: What underwriting issu

For more insights on this topic, see our guide on The D&o Insurance For Startups Myth Thats Costing You.

es most delay a D&O bind? A: Missing loss runs, unclear indemnification language, undisclosed regulatory inquiries, and material contracts exposures.

Glossary

• Side A Coverage: Protects directors and officers personally when the company cannot indemnify them.
• Side B Coverage: Reimburses the company for defense costs and settlements paid on behalf of directors.
• Side C Coverage (Entity Coverage): Covers securities claims against the company itself.
• Indemnification Agreement: Contract where the company agrees to indemnify and advance defense costs to directors or officers.
• Retention: The amount the insured pays out of pocket before insurance responds (deductible-like amount).
• Prior‑Acts Date: The date from which past acts are covered; mis‑setting this can exclude early activities.
• Panel Counsel: A group of pre‑approved lawyers selected by the carrier to handle defense.