When to Choose a Single Large Limit vs Separate Limits for Entity and Individual Coverage in Directors and Officers (D&O) Liability Insurance

Directors and Officers (D&O) liability insurance is a cornerstone of corporate risk management in the United States. One of the most consequential program design choices is whether to buy a Single Large Limit (SLL) that covers both entity and individual exposures, or to purchase separate limits for the entity (Side C or entity coverage) and for individuals (Side A/B). This article—focused on U.S. companies (examples drawn from New York, San Francisco, and Chicago markets)—walks through the commercial tradeoffs, cost dynamics, claim scenarios, and practical selection guidance.

Table of Contents

Why limits structure matters

The limits structure determines how available coverage is allocated when claims arise. A poor choice can lead to:

Exhaustion of protection for directors at a critical time.
Suboptimal premium efficiency.
Coverage disputes in bankruptcy or derivative claim scenarios.

Decisions should be made in the context of company size, public/private status, industry, claim history, and tolerance for retention/self-insured risk.

Quick definitions

Single Large Limit (SLL): One aggregate limit shared by entity and individuals for all covered claims.
Separate Limits: Distinct sub-limits (or standalone policies) for entity claims versus individual claims (often Side A as a dedicated or standalone layer).

Summary comparison

Feature	Single Large Limit (SLL)	Separate Limits (Entity vs Individual)
Simplicity	High — single pot to manage	Moderate — requires allocation rules
Cost (premium efficiency)	Often lower up-front premium	Can be higher—increased underwriting complexity
Protection for directors (Side A)	Can be indirectly reduced if entity claims exhaust limit	Can secure dedicated Side A limits; better director protection
Bankruptcy handling	Entity claims may exhaust shared pool	Standalone Side A often survives bankruptcy challenges
Best for	Small private companies with limited claim exposure	Public companies, companies with bankruptcy risk, high-profile executives
Administrative complexity	Low	Higher

When to favor a Single Large Limit (SLL)

Consider SLL when multiple of these apply:

You are a small to mid-market private company (e.g., early-stage to lower-revenue firms in San Francisco or Austin) with limited premium budget and low historical claims activity.
Your governance exposures are moderate and the company prefers a single, simpler aggregate limit to avoid paying separate premiums.
You require premium efficiency and are comfortable managing internal priorities if coverage is exhausted by entity claims.
You have strong balance sheet and would be prepared to indemnify directors if necessary.

Practical note: many carriers that serve small companies (Hiscox, Travelers, The Hartford) offer packaged D&O products and SLL options that are competitively priced for smaller risks. See product pages for typical small-business D&O options:

Example illustrative pricing (U.S. market context):

Small private company, $1M SLL: $2,000–$15,000/year depending on revenue, industry, and claims history.
Note: these ranges are illustrative; exact quotes will vary by carrier (AIG, Chubb, Hiscox, Travelers, Beazley) and underwriting factors.

When to choose Separate Limits

Separate limits are usually appropriate when any of the following apply:

You’re a publicly traded company (New York, Chicago, Boston) where securities litigation and regulatory exposures are material.
The company faces bankruptcy risk or rapid liquidity stress. In bankruptcy, entity claims (Side C) or derivative suits often consume shared limits; a dedicated Side A limit often remains available for individual defense and indemnity.
You have high-profile executives or a board that requires independent protection.
You want to structure a layered tower (e.g., Side A excess) or captive solutions that specifically protect individuals.

Why this matters: Under separate limits, an independent Side A limit or a standalone Side A policy ensures directors have funds to defend/settle even if the company limit is exhausted by entity claims. Public companies often pay premiums in the tens to hundreds of thousands of dollars for higher limits (e.g., $5M–$50M) and complex towers—market conditions and prior loss experience shape pricing aggressively.

Allocation mechanics and policy language

When you use an SLL, the policy must include a clear allocation clause that governs:

How losses are allocated between entity and individual claims.
Which side has priority when multiple claim types arise.
Poorly written allocation clauses lead to litigation. For guidance on allocation strategies and the legal interplay across Sides A/B/C, see: How to Allocate Limits Across Sides A, B and C in Directors and Officers (D&O) Liability Insurance.

If you’re weighing retention and attachment, pair this review with retention strategy guidance: Deductible vs Retention: Structuring Your Directors and Officers (D&O) Liability Insurance Attachment to Optimize Cost.

Cost examples and carriers (U.S. market)

Chubb and AIG: primary markets for mid-to-large public and private companies; premiums for $5M–$20M limits can be from $50,000 to $250,000+ annually for public companies, depending on industry (financial services and biotech often at the higher end). See Chubb D&O overview: https://www.chubb.com/us-en/business-insurance/directors-and-officers-insurance.html
Hiscox and Travelers: active in the small-business and private-market D&O segments; typical small private-company $1M–$5M limit programs may start in the low thousands annually. Hiscox markets small D&O products online (quotes vary by state and company profile).

Always obtain multiple competitive quotes—market capacity and pricing differ significantly between carriers and hubs (e.g., San Francisco startups vs. New York public companies).

Practical decision framework (step-by-step)

Assess exposures
- Are you public or private? Revenue, market cap, industry litigation trends.
- Bankruptcy likelihood? Pending regulatory inquiries?
Model plausible claim scenarios
- Example scenarios: securities class action ($5M–$30M), employment practice class action ($500k–$5M), fiduciary claim in bankruptcy ($2M–$10M).
Stress-test limits
- Use scenario planning to see how an SLL would be consumed vs separate limits. For modelling templates see: Scenario Planning: How to Stress‑Test Your Directors and Officers (D&O) Liability Insurance Limits and Retentions.
Consult brokers/market specialists
- Ask about standalone Side A and excess towers, captive alternatives, and retention strategies.
Negotiate policy language
- Insist on clear allocation clauses and bankruptcy carve-outs, and verify defense/indemnity payment priority.

Example scenarios (U.S. city-specific context)

San Francisco VC-backed startup: lower litigation frequency but high investor scrutiny. SLL with $3M–$5M may be cost-effective if board indemnity is strong and company can indemnify directors.
New York public fintech: heightened securities/regulatory risk. Separate limits with dedicated Side A ($5M–$10M) and entity limit ($10M+) recommended.
Chicago privately held manufacturing firm with bankruptcy risk: dedicated Side A plus a captive retention strategy could preserve executive defense funds during insolvency.

Final recommendations

Choose SLL when budget-conscious, private, low-litigation-exposure businesses require simplicity and premium efficiency.
Choose separate limits when director protection is mission-critical (public companies, bankruptcy risk, high-profile executives), or when you need to structure an excess tower or captive.
Always stress-test coverage under realistic claim scenarios and negotiate allocation and bankruptcy language with your broker and legal counsel.