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Checklist for First‑Time Buyers: Securing Directors and Officers (D&O) Liability Insurance for Your Private Company

Directors and Officers (D&O) liability insurance protects company leaders from claims alleging wrongful acts in managerial decisions. For private companies and SMEs in the USA — whether headquartered in New York, San Francisco, Austin, or Chicago — buying your first D&O policy is a critical step to attract investors, recruit executives, and shield balance sheets. This checklist walks first‑time buyers through practical steps, pricing expectations, carrier choices, and negotiation tips so you can buy smartly and cost‑effectively.

Quick overview: Why private companies need D&O

  • Protects individual directors and officers for claims alleging breach of fiduciary duty, misrepresentation, employment practices, or securities claims (private securities suits are increasingly common for growth companies).
  • Supports recruitment and retention: Executive candidates increasingly expect D&O coverage.
  • Investor comfort: VCs and private equity often require or recommend D&O coverage as a condition of investment.

For broader strategic options and cost-saving structures, see Affordable Directors and Officers (D&O) Liability Insurance Solutions for Private Companies and SMEs.

Step‑by‑step checklist before you call a broker or carrier

1. Gather company facts (Documentation)

Have these ready to speed quotes and reduce surprise underwriting questions:

  • Articles of incorporation, state of incorporation (e.g., Delaware, California).
  • Current cap table and list of investors.
  • Latest financials: revenue for current and prior year(s).
  • Employee count and contractor/independent contractor structure.
  • Organizational chart and list of directors/officers with titles and prior board experience.
  • Any past or pending claims, litigation, or regulatory inquiries.

2. Understand your risk profile

Answer these internal questions:

  • Are you a Delaware‑incorporated startup with VC backing in San Francisco? (Higher litigation visibility)
  • Do you have public‑facing products that could trigger regulatory attention (health tech, fintech)?
  • Is your revenue under $5M, $5–50M, or above $50M? (Revenue is a major pricing driver)

3. Decide target limits and retention

4. Request quotes from multiple carriers and compare

Top carriers for US private company D&O include Hiscox, Chubb, Travelers, and AIG. Collect comparable policy forms and endorsements, not just price.

5. Evaluate policy scope — what to confirm

  • Side A, B, C coverage: For private companies, confirm Side A (individual D&O) and Side B (company indemnification) components. Side C (entity securities) may be needed for companies with public exposure.
  • Coverage for derivative suits and shareholder claims
  • Employment‑related practices (ERISA, employee lawsuits) — sometimes excluded or limited.
  • Runoff/extended reporting period: Essential if you anticipate mergers or leadership exits.
  • Severability and prior knowledge clauses — these can substantially affect coverage.

Pricing expectations (USA market, 2024 context)

Pricing varies heavily by revenue, industry, claims history, and investor profile. Use these ballpark ranges as a starting point:

  • Small private company (revenue <$5M): $1,000–$5,000 per year for $1M limit.
  • Mid‑sized private (revenue $5M–$50M): $5,000–$25,000 per year for $1M–$5M limits.
  • Growth companies with VC backing or higher litigation exposure: $10,000–$100,000+ per year for higher limits ($5M–$10M).

These ranges align with insurer market guidance and industry reporting (see Investopedia and Forbes Advisor for context on D&O cost drivers):

Note: carriers publish starter pricing variations — for example, Hiscox markets small business D&O options and often shows entry‑level premiums under $2,000 for very small entities depending on deductible and underwriting. See Hiscox small business D&O product pages for illustrative offerings: https://www.hiscox.com/small-business-insurance/directors-and-officers-insurance

Side‑by‑side: sample carriers and typical strengths

Carrier Typical starting premium (US private SMEs) Strengths / Notes
Hiscox $500–$3,000 (small) Focus on small businesses, packaged offerings, fast online quotes.
Chubb $3,000–$25,000+ Deep capacity, strong appetite for middle‑market/private companies, broad forms.
Travelers $2,000–$20,000+ National broker access, flexible endorsements for ERISA/employee claims.
AIG $5,000–$50,000+ Global capacity for high‑risk or growth companies with private securities exposure.

(Prices are illustrative ranges reflective of US market norms as of 2024; exact quotes vary by state and underwriting.)

Questions to ask brokers and underwriters

  • How do you define a “claim” for trigger and reporting purposes?
  • Are pre‑claim inquiries by regulators or plaintiffs covered?
  • What are the key exclusions (fraud, criminal acts, bodily injury/ property)?
  • Is there coverage for derivative investigations and shareholder derivative suits?
  • What runway/extending reporting period options do you offer on cancellation or M&A?
  • Can you provide sample policy wordings and endorsed amendments for review?

For negotiation and brokerage tactics aimed at SMEs, see: Negotiation Tips for SMEs Buying Directors and Officers (D&O) Liability Insurance: Get Better Terms Without Breaking the Bank

Common red flags that drive up price or cause declination

  • Prior or active securities litigation, regulatory investigations, or class actions.
  • Significant related‑party transactions or undisclosed conflicts of interest.
  • Rapid growth with thin governance controls (no audit committee, inexperienced board).
  • High revenue concentration with a single large customer — amplifies “management” risk.

For real claim examples and lessons, read: Common Claims Facing Private Companies and How Directors and Officers (D&O) Liability Insurance Can Help

Final steps before binding coverage

  • Compare price, form, limits, and retentions — don’t buy on price alone.
  • Obtain signed applications from each director/officer if required.
  • Ensure the policy includes a runoff/extended reporting period option and confirm what happens at M&A or IPO.
  • Keep a master policy file and circulate a certificate of insurance to investors and key recruits.

Quick checklist (printable)

  • Company docs, financials, cap table ready
  • List of directors/officers and prior claims history
  • Target limits and retention decided ($1M–$5M typical)
  • Solicit quotes from 3+ carriers/brokers
  • Review policy forms for Side A/B/C and exclusions
  • Negotiate endorsements and extended reporting/runoff
  • Bind policy and circulate certificate

Securing D&O for the first time can feel technical, but a structured approach shortens procurement time and improves outcomes. Start with the facts, prioritize coverage form as much as price, and use multiple competitive quotes — particularly if you’re in high‑visibility markets like San Francisco, New York, Austin, or Chicago. If you’ve got a specific company profile (revenue, investors, state of incorporation), bring those facts to your broker for tailored quotes and a comparison of options.

External sources and further reading:

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