Directors and Officers (D&O) Insurance - What Is It, Cost and Coverage

Directors and Officers Insurance, also known as D&O insurance, is a type of liability insurance designed to safeguard individuals serving as directors or officers of a business or other organisation from personal financial losses

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An Introduction to Directors and officers insurance

What Is Directors and Officers (D&O) Insurance?

Directors and Officers Insurance, also known as D&O insurance, is a type of liability insurance designed to safeguard individuals serving as directors or officers of a business or other organisation from personal financial losses.

These losses may arise if they are sued for alleged wrongful acts performed in their managerial roles. The coverage also extends to the legal fees and other related costs that the organisation might incur due to such lawsuits.

Furthermore, D&O insurance covers defence costs arising from regulatory investigations or trials. However, it's important to note that intentional illegal acts are typically not covered under this insurance.

In essence, D&O insurance is a crucial protective measure for individuals in directorial or officer roles within businesses or organizations.

Understanding Directors and Officers (D&O) Insurance

Directors and Officers (D&O) Insurance is a critical form of coverage in the business landscape, designed to protect the personal assets of directors and officers from potential litigation costs associated with their managerial roles in a company or organization.

With the increasing regulatory scrutiny and the growing culture of corporate governance, the role of directors and officers has become more challenging. They are often held personally liable for the decisions they make on behalf of the company.

This liability can extend to a wide range of issues, including financial loss due to mismanagement, non-compliance with laws and regulations, employment practices, and more.

D&O insurance provides a safety net for these individuals, covering the legal fees, settlement costs, and other expenses associated with defending themselves in potential lawsuits.

It's important to note that while D&O insurance covers defense costs arising from regulatory investigations, it typically does not cover intentional illegal acts or fraud.

In the Indian context, D&O insurance is not just relevant for large corporations. Small and medium-sized enterprises (SMEs), startups, and non-profit organizations also need this coverage.

The leaders of these organizations can face personal liability in the same way as their counterparts in larger companies.

Moreover, with the introduction of stricter laws like the Companies Act 2013, the need for D&O insurance in India has become more pronounced. The Act has increased the accountability of directors and officers, making them more susceptible to legal action.

D&O insurance is a vital tool for risk management in businesses. It provides peace of mind to those in leadership roles, allowing them to make decisions confidently, knowing they have a safety net in place

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Types of D&O Insurance



Who is Insured

Assets at Risk

Side A

Covers directors and officers for claims where the company is financially unable to pay for indemnification. This can occur, for example, if the company has declared bankruptcy.

Individual Officer

Personal Assets

Side B

Covers the losses of directors and officers when the company does grant indemnification. In this case, the policy will reimburse the company for legal costs.

The Company

Corporate Assets

Side C - Securities Claim

Side C covers and protects the company against the claim filed by the shareholders in connection with buying and selling or ownership of securities. Applicable for listed companies only

The Company

Corporate Assets

Why is Directors and Officers Insurance Required?

Here are several reasons why an organisation needs D&O Insurance:

  1. It provides protection against allegations of employment practice violations such as sexual harassment and discrimination, regulatory investigations, accounting irregularities, and requirements of corporate governance.

  2. It offers coverage for potential exposures that may arise during mergers and acquisitions.

  3. It aids in complying with various legal statutes.

  4. It assists in managing vulnerabilities related to shareholder's or shareholder's claims.

  5. Its also a mandatory risk solution advised by all investors/VCs especially during fundraising

  6. Its a good employee retention strategy too where leaders have the peace of mind while steering the company and making important leadership decisions on a day to day basis

Features & Benefits of D&O Insurance Policy

Here are some key features and benefits of Directors and Officers insurance:

  1. Directors insurance offers comprehensive coverage on an unnamed basis, covering directors of all ages, regardless of their position. With Plum’s D&O policy, we ensure that your cover includes retired, current, and future directors

  2. The policy provides protection in the event of any alleged or actual error, omission, misstatement, breach of duty, or misleading statement.

  3. Typically, investors view D&O coverage as a necessary condition before they invest funds into a company.

There are two primary clauses under D&O insurance with the option of selecting a third clause. These clauses are commonly known as Side A, Side B, and Side C.

D&O Coverage

What does D&O Insurance Cover and Not Cover?

What's Covered in D&O Insurance

What's Not Covered in D&O Insurance

Right to defend coverage

Coverage for any kind of fraudulent activity

Coverage for subsidiaries, outside directorship, retired directors, assets, and liberty costs such as bail bond, prosecution, civil bond expenses, heirs, legal and estates representatives, emergency expenses, kidnap response, defense cost, severability and pollution-associated claims for defense expenses and shareholder claims

Coverage for any kind of intentional non-compliant activity

Employment practice liability cover

Coverage for any personal profit or illegal remuneration

Damage to reputation cover

Coverage if the action has been taken before the initiation of the policy

Regulatory crisis response coverage

Coverage for any kind of property damage or bodily injury

Special excess security for non-executive directors

Coverage for known prior matters and notifications

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Directors And Officers (D&O) Insurance - Examples with Claims

  • Employment Practices Claim:

    This arises when an employer or manager is alleged to have committed wrongdoings against their employees, such as unjust termination, discrimination, or violation of legal obligations.

    Employees may claim that the employer violated hiring or firing protocols or behaved inappropriately in the workplace.

    Shareholder Lawsuit:

    Shareholders, or part-owners of a company, can legally challenge the directors or officers if they believe their actions have resulted in financial losses for the company or violated company regulations.

    Shareholders may argue that the management mishandled the company, misrepresented crucial facts, or withheld important information.

    Breach of Duty Claim:

    Directors and officers are obligated to make decisions in the company's best interest. If they fail to do so, make poor decisions, deceive, or perform their duties inadequately, they can be accused of breaching their duty.

    This can lead to claims alleging irresponsible actions that resulted in financial losses for the company or its owners.

    Investor Suits:

    Investors may file a Directors and Officers (D&O) claim against a portfolio company if they believe that the company's directors or officers acted improperly or failed to fulfil their duties, leading to damage or financial losses.

Who can Get Covered Under D&O Liability Insurance?

Here's a list of individuals who can get covered under D&O insurance.

  • Directors

  • Spouses

  • Officers

  • Legal Heirs

  • Company Secretaries

  • Employed Lawyers

  • Estate Representatives

Who can Take Action Against Directors and Officers?

Here is a list of individuals who can take action against Directors and officers:

  • Regulators

  • Other Stakeholders

  • Competitors

  • Customers

  • Employees

  • Shareholders

  • Suppliers

Do Small Businesses Need D&O Insurance?

Small enterprises are not exempt from expensive legal proceedings. It's a common misconception that lawsuits and penalties are solely the result of unhappy shareholders, a scenario often seen in high-profile cases involving large public corporations.

However, for private firms, the most detrimental lawsuits originate from the employees of the company, where they file lawsuits against the employer. These lawsuits also arise from customers, suppliers, and other external parties.

Small businesses may be particularly susceptible to a potentially harmful lawsuit due to their limited financial resources, unlike their larger counterparts who might have more substantial financial backing.

How Much Does D&O Insurance Cost?

The cost of D&O insurance is affected by factors such as company size and industry, financial background and length of time in business.

Plum understands the intricacies of D&O Insurance costs and business vulnerabilities. In order to simplify and make the process transparent, we have developed the Plum Business Policy Engine.

Our engine offers you valuable insights into policies suitable for businesses similar to yours, along with estimated expenses.

D&O Insurance Liability Claims Process - How to raise a claim?

These are the steps to file a D&O insurance claim. Following are the steps to file a D&O insurance claim:

  1. Initiate contact on priority with the Plum team to report the incident.

  2. Plum works promptly with the insurer partner and subsequent course of action is determined.

  3. In collaboration with Plum and the insurers, an investigator is designated to assess the severity and analyse the details of the incident.

  4. Expert guidance on containment measures to prevent the situation from worsening further is provided.

  5. The Plum team aids you in comprehending the necessary documentation, which includes records on the extent of the impact, the actions taken for remediation, and any direct expenses incurred during the claims procedure.

  6. Following an in-depth analysis of the documentation, the survey report is created.

  7. Plum maintains a strong liaison with the insurer and policyholder throughout the claim approval process.

How to Renew D&O Liability Insurance?

To renew your D&O Liability Insurance policy, contact the Plum team, who will initiate the renewal procedure. Armed with your policy documentation and pertinent details, Plum will offer comprehensive guidance throughout the renewal process.

Typically, a renewal with Plum entails the following steps:

  1. Plum conducts a thorough evaluation of your policy parameters, including coverage, costs, and exclusions. This evaluation is benchmarked against market standards and industry peers.

  2. Based on these evaluations/ alterations in your data or business operations, Plum provides tailored recommendations for shaping your D&O Liability Insurance policy.

  3. Once these policy recommendations are established, we collaborate with top-tier insurance partners in the market to craft the most exhaustive and competitively priced policies for your company.

  4. The Plum team makes the process of renewing and booking a D&O Liability Insurance policy smooth and hassle free.

Why Plum?

  1. Expert advisors

    The Plum team is adept with experts in the field of insurance. Having deep dived in the insurance industry for years now across various industries, helping SMEs and large enterprises alike, we have the right expertise to consult for your business . This experience helps us build expertise. The team will be by your side right from curating plans for your business to policy purchase and claims settlement

  2. Cost competitiveness

    We leverage our strong insurer relationship and bring evolving knowledge of claims trends, reinsurer market and price fluctuations to the table. This allows us to present competitive and comprehensive plans in the market, tailored to your business.

  3. Smooth claims settlement

    Claims are complex in nature and the repercussions of these claims may sometimes take days/months to recover from, if not years. Plum helps you navigate such long-drawn claims processes with ease by liaising our deep partnership with insurers, legal counsel, and our team of experts.


I am the founder of a new tech startup. What is the basic and must-have policy should I look at and how much will it cost?

A D&O cover is crucial for businesses in the tech industry. To better understand the policies and costs involved with growing tech startups, check out our policy recommendation engine here.

One of my prior employees is suing the management. Will D&O cover the claim expenses?

Yes, this claim is covered under the Employment Practices Liability Insurance (EPLI).   The EPLI covers losses incurred by the insured if sued by past, present or prospective employees.

Say a Director makes an erroneous statement leading to financial losses for employees/ customers/ other stakeholders. Is this covered under D&O?

Yes, such wrongdoing costs and errors are covered under D&O policy. However, one must read the coverages in one's existing policy to understand the details better.

Does D&O insurance cover criminal acts or intentional wrongdoing?

No, D&O insurance does not cover claims arising from criminal acts, intentional fraud, or deliberate illegal activities.

Can small and private companies benefit from D&O insurance?

Yes, D&O insurance is not limited to large public companies. Even small and privately held companies can benefit from D&O coverage, as they may face similar risks of claims from shareholders, employees, creditors, or regulatory bodies and their own employees

How does D&O insurance differ from other types of liability insurance?

D&O insurance focuses specifically on protecting directors and officers from personal liability arising from their managerial decisions. It is distinct from general liability insurance, which covers bodily injury, property damage, and other general risks.

What are "Side A," "Side B," and "Side C" coverages in D&O insurance?

"Side A" coverage protects individual directors and officers when the company cannot indemnify them. "Side B" coverage reimburses the company when it indemnifies its directors and officers. Side C covers and protects the company against the claim filed by the shareholders in connection with buying and selling or ownership of securities. (Applicable for listed companies only)

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