Selling D&O Insurance: A Board Approval Roadmap

According to Chubb, 25% of private companies face a D&O claim within any three-year period. A Hartford study found the average claim costs over $400,000.

This guide shows you how to get D&O insurance approved in a single board meeting.

Why Do You Need to Sell D&O Insurance?

To successfully sell D&O insurance, focus on presenting clear financial risk mitigation strategies that protect board members personally. Emphasize statistical evidence of potential claims and demonstrate how D&O coverage provides critical protection against potentially devastating legal expenses.

D&O (Directors and Officers) insurance protects you and your board members personally when someone sues the company’s leadership.

Here’s what that looks like in practice: Two startups were hit with claims from early employees alleging they deserved more equity. Both claims were thrown out—but defense costs alone still exceeded $50,000 each. With D&O insurance, the policy covers those costs even when you win.

Three reasons to prioritize this:

1. Personal protection. If your company can’t cover legal costs—or goes under—D&O covers you individually. This is called “Side A” coverage.

2. Director recruiting. Most experienced independent directors won’t join without it.

3. Fundraising speed. Investors ask about D&O in diligence. Having it removes a checkbox.

Experienced founders tend to prioritize insurance early. They’ve seen what happens without it.

When Should You Bring Up D&O Insurance?

• Before your first institutional round
• Before adding an independent director
• Before international expansion

Don’t wait until someone asks. You’ll get worse terms and cause delays.

How to Sell D&O Insurance in One Meeting?

1. Gather Documents First

Insurers need these to quote you:

• Bylaws
• Signed indemnification agreements
• Recent board minutes
• Cap table and org chart

Clean docs speed up quotes and can earn better pricing.

2. Get Two Quotes with Identical Terms

Same coverage limits, same deductible (called “retention”), same exclusions. This makes price the only variable.

Don’t bring five options. Two is enough.

3. Get Lawyer Sign-Off Before the Meeting

Have counsel confirm both quotes align with your bylaws and indemnification agreements. Bring their written approval.

4. Present One Recommendation

“We have two quotes for $2M coverage with $25K retention. Insurer A: $10K/year. Insurer B: $12K/year. We recommend A.”

Lead with your pick. Have a fallback ready.

5. Bring the Resolution

Draft the board resolution in advance. If approved, you can bind coverage immediately.

What Should You Say to Each Board Member?

Lead investor: “This removes a diligence line item and shortens our timeline.”

Independent director: “Side A protects you personally if the company can’t indemnify you.”

CFO: “Both quotes fit our budget. We’ve allocated for this in the cash plan.”

How Do You Handle D&O Insurance Pushback?

“Too expensive.” → A startup nightclub faced an investor lawsuit alleging misrepresentation. Settlement plus defense: over $500K. The premium is cheap compared to one claim.

“Let’s wait until after the round.” → Buying mid-diligence increases scrutiny and can delay closing. Bind now.

“Our investors will indemnify us.” → Investor indemnification doesn’t work if you’re insolvent. D&O protects directors directly.

“We don’t need it to hire directors.” → Most experienced independents require it. This lets you announce a hire immediately.

Coverage by Stage

Your situation may vary based on revenue, international presence, and investor concentration.

FAQ

When should a startup first purchase D&O insurance?

Startups should purchase D&O insurance before their first institutional funding round or when appointing outside directors. Most venture capital firms require D&O coverage as a condition of investment, and individual directors increasingly refuse board seats without this protection (NACD, 2023). The optimal timing is during Series A fundraising, as 78% of venture-backed companies secure D&O policies at this stage to protect both founders and incoming board members from personal liability (Marsh McLennan, 2024).

How much does D&O insurance cost for early-stage companies?

D&O insurance for early-stage startups typically costs between $2,000 and $15,000 annually for $1-3 million in coverage. Seed-stage companies with minimal revenue generally pay $2,000-5,000, while Series A companies pay $5,000-10,000, and Series B companies pay $10,000-15,000. Premium costs represent approximately 0.5-1% of the coverage limit and vary based on company valuation, industry sector, revenue, and number of board members requiring protection (Marsh McLennan, 2024).

What does D&O insurance actually cover for board members?

D&O insurance covers legal defense costs and settlements when directors and officers face lawsuits alleging wrongful acts, including breach of fiduciary duty, misrepresentation, regulatory violations, and employment practices claims. The policy protects personal assets of board members from shareholder lawsuits, regulatory investigations, and employee claims. Coverage typically includes Side A (individual protection), Side B (company reimbursement), and Side C (entity coverage), with limits ranging from $1 million to $10 million for private companies.

Can you get board members without D&O insurance?

Recruiting experienced board members without D&O insurance is extremely difficult, as 92% of directors consider liability protection essential before accepting board positions. Independent directors and venture capital representatives routinely decline board seats at companies lacking D&O coverage due to personal financial risk exposure. The NACD reports that director recruitment timelines increase by 3-6 months for companies without insurance, and candidates who do join often negotiate additional indemnification agreements or higher compensation.

How do you present D&O insurance costs to reluctant founders?

Present D&O insurance as a board recruitment and risk management investment, not an expense. Frame the annual premium as equivalent to 0.1-0.3% of a typical funding round while emphasizing that lack of coverage can delay fundraising by 2-4 weeks and cost qualified board candidates. Highlight that one employment practices lawsuit averages $160,000 in defense costs alone, making the premium a cost-effective protection. Compare the insurance cost to other professional services like legal and accounting that founders readily accept.

Part of our D&O Insurance Guide — Everything startups need to know about directors and officers insurance.

Conclusion

Tie your request to a trigger. Bring two quotes with identical terms. Get lawyer sign-off in advance. Present one clear recommendation.

Get the vote, bind coverage, move on.

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For more on D&O basics, see D&O Insurance for Startups.