Checklist for Founders: Securing Investor‑Friendly Directors and Officers (D&O) Liability Insurance Ahead of Listings

Preparing for an IPO or a major liquidity event? Investors will scrutinize your Directors & Officers (D&O) liability program. Getting D&O right before a listing—especially in US markets such as San Francisco, New York City, Boston, or Los Angeles—reduces deal friction, unlocks investor consent, and protects your executives and board from litigation costs. This checklist gives founders a practical, investor‑focused roadmap to secure competitive, IPO-ready D&O coverage.

Table of Contents

Why investors care about D&O (short answer)

Protects the board and executives from claims alleging wrongful acts, misstatements, or fiduciary breaches.
Reduces litigation risk to investor returns — insurers defend and indemnify executives, limiting personal claims against founders and investors.
Signals governance readiness: strong D&O programs demonstrate operational maturity to underwriters and public investors.

Investors often require specific terms (limits, side A wording, consent to settle) before funding or approving a listing. See practical guidance in VC‑Driven D&O Demands: What Venture Capitalists Expect from Directors and Officers (D&O) Liability Insurance.

At‑a‑glance checklist for founders (pre‑listing)

Obtain D&O quotes from at least 3 specialized carriers/brokers.
Confirm minimum limits investors expect (commonly $5M–$10M pre‑IPO).
Secure a Side A (individual executive) minimum — investors often request dedicated Side A or higher sublimits for independent directors.
Add entity coverage or ensure separate entity policy as required by investors.
Include investor/inclusion endorsements: insured v. insured carve-outs, broad definition of “claims,” and consent to settle provisions.
Ensure retroactive date covers historical claims (no gaps).
Verify coverage for pre‑IPO activities: M&A diligence, public filings, and SEC inquiries.
Confirm notice procedures, severability, and defense outside the limits for Side A.
Negotiate deductible/retention amounts acceptable to VCs and prospective underwriters.
Obtain a policy summary and specimen policy for legal and investor review at least 60 days before filing.

Key D&O policy features investors will check

Limits of liability: Investors typically push for at least $5M–$10M for late‑stage/private companies approaching IPO. Public companies often carry $25M–$100M+.
Side A enhancement: Protects individual directors when company cannot indemnify.
Insured v. Insured (IvI) carve‑outs: Investors often request narrowing of IvI exclusions to avoid wrongful use by insiders.
Prior acts/retro date: No retro gaps; investors want continuous coverage dating back to company formation or significant transaction dates.
Severability & allocation: Ensures wrongful acts by one insured do not void coverage for others.
Advancement of defense costs and consent to settle provisions.

For negotiation tactics and investor representation language, review Representation of VCs and Key Investors in Directors and Officers (D&O) Liability Insurance Policies.

Typical pricing expectations (U.S. market focus: San Francisco, NYC, Boston, LA)

Pricing varies by stage, industry, claims history, and carrier. The table below summarizes commonly reported market ranges for the U.S. VC-backed company market (figures compiled from insurer product pages and broker market commentary):

Company Stage	Typical Limit Purchased	Typical Annual Premium Range (USD)	Typical Carriers/Comments
Seed / Pre‑seed (small teams)	$1M–$2M	$2,000 – $10,000	Small business-focused carriers (e.g., Hiscox offers small biz D&O products); low exposures. Hiscox D&O
Series A–B	$2M–$5M	$10,000 – $40,000	Specialty carriers: Beazley, Chubb, AIG; premiums scale with revenue and investor composition.
Growth / Pre‑IPO (late VC)	$5M–$10M (often $10M+)	$40,000 – $150,000+	Underwriter scrutiny increases; marketplace brokers (Marsh/Aon) report higher demand and pricing pressure. Marsh D&O resources
Post‑IPO / Public	$25M–$100M+	$200,000 – $1M+	Public company placements with global insurers; renewals can spike after public filing/events.

Sources: insurer small-business product pages and broker market commentary — see Investopedia primer and broker market updates for context on price drivers and claim trends (Investopedia D&O overview: https://www.investopedia.com/terms/d/do-insurance.asp).

Note: These ranges are illustrative; obtain firm quotes tailored to your revenue, employee count, cap table, and industry.

How to shop effectively (founder playbook)

Work with a broker experienced in VC and IPO placements (San Francisco and New York markets require specialist knowledge).
Prepare a D&O information packet: cap table and investor list, previous policies and claim history, current bylaws/indemnification provisions, and planned IPO timetable.
Request multiple carrier term sheets with identical limit/retention specs to compare true pricing and endorsements.
Push for a favorable retroactive date and Side A wording; VCs will often request explicit Side A or Side A‑only excess limits.
Lock in coverage at least 90–120 days before your S‑1 filing — insurers need time to underwrite transactional risk.

For timing and escalation as you approach a listing, see Preparing for an IPO: How Directors and Officers (D&O) Liability Insurance Needs Change During the Process.

Negotiation levers founders can use

Offer higher retentions/deductibles to reduce premium while keeping investor-required endorsements intact.
Agree to enhanced corporate governance commitments (audit committee charters, disclosure protocols) to obtain better pricing.
Consider a layered program: primary D&O with excess placements across A‑rated carriers to satisfy investor requests for insured capacity.
Use broker leverage: present competing term sheets to obtain appetite from top carriers (Chubb, AIG, Beazley, Zurich).

Example timeline (targeting NYC or SF IPO)

T‑180 to T‑120 days (pre‑S‑1): Engage broker, collect quotes, secure target policy wording.
T‑120 to T‑60 days: Finalize carrier, secure binder/placement, deliver specimen policy to investors and counsel.
T‑60 to T‑0: Adjust limits/retentions if transactional terms change (e.g., major M&A).
Post‑IPO: Anticipate significant premium increase at first public renewal; budget accordingly.

Red flags that trigger investor pushback

Retroactive date gaps or lapses in coverage.
Broad insured v. insured exclusions that eliminate coverage for inter‑insured claims.
Lack of Side A enhancement or insufficient Side A limits for independent directors.
Unmarketable carriers (below A‑rating) or missing excess capacity.

Quick actionable checklist (printable)

Engage experienced D&O broker (VC/IPO experience).
Gather company legal/financial package for underwriters.
Obtain 3+ term sheets from A‑rated carriers.
Confirm minimum investor limit (commonly $5M–$10M pre‑IPO).
Secure Side A enhancement and acceptable IvI carve‑outs.
Lock retro date and avoid coverage gaps.
Deliver specimen policy to investors and counsel 60+ days pre‑filing.
Budget for premium step‑up after IPO.

Sources & further reading

Hiscox — Directors and Officers Insurance (small business product): https://www.hiscox.com/small-business-insurance/directors-officers-insurance
Marsh — D&O insights and market commentary: https://www.marsh.com/us/insights/research/d-and-o.html
Investopedia — Overview of Directors and Officers Insurance: https://www.investopedia.com/terms/d/do-insurance.asp