Without D&O cover, a director's personal savings, property, and other assets could be at risk if the company itself can't (or won't) cover the cost of a claim against them. This guide will explain what D&O insurance covers, who might need it, and how it works.

How Does D&O Insurance Work?

D&O insurance is often needed when a director or officer is personally named in a claim relating to how they've carried out their role.

This might be a result of:

  • Shareholders alleging poor financial oversight

  • Employees alleging discrimination or wrongful dismissal decisions made by leadership

  • Regulators investigating governance failures

  • Creditors pursuing claims during insolvency

  • Competitors alleging unfair business practices

The policy typically covers defence costs (legal fees, even if the claim is later dismissed) and damages or settlements the director is ordered to pay, up to the policy limit.

The Three Standard D&O Insuring Clauses

Most D&O policies are built around three core areas of cover, often labelled Side A, Side B, and Side C:

  • Side A: Covers directors and officers directly when the company cannot indemnify them (for example, during insolvency).

  • Side B: Reimburses the company when it does indemnify its directors on their behalf.

  • Side C: Also known as entity cover, this protects the company itself and is usually limited to securities claims.

Who Needs D&O Insurance?

D&O insurance isn't just for large listed companies. Any organisation with a formal board or management structure can benefit, including:

  • Private limited companies where directors carry personal liability under the Companies Act 2006.

  • Startups and scale-ups, as early-stage companies are increasingly targeted in disputes as they raise funding rounds and bring on investors.

  • Charities and not-for-profits where trustees can be held personally liable for governance failures

  • Public sector bodies and NHS trusts when board members face scrutiny over financial and operational decisions.

  • Listed (public) companies that face higher exposure to shareholder claims and regulatory investigations

Even a small business with two or three directors can face a claim from a disgruntled employee, investor, or creditor. Because of this, cover is generally recommended for any business with more than one director, external investors, or regulatory exposure.

What Does D&O Insurance Cover?

Typical D&O policies cover claims relating to:

  • Breach of duty or breach of trust

  • Wrongful trading or misfeasance

  • Health and safety failures attributed to management decisions

  • Employment-related claims (e.g. discrimination, unfair dismissal) where a director is named

  • Regulatory investigations and fines (where insurable by law)

  • Defamation arising from statements made in a director capacity

  • Environmental liability linked to board-level decisions

Most policies exclude:

  • Fraudulent or criminal acts

  • Claims arising from known circumstances that existed before the policy started

  • Bodily injury and property damage (covered instead under public/product liability)

  • Fines and penalties where insuring them would be illegal

How Much Does D&O Insurance Cost?

Premiums vary based on:

  • Company size, turnover, and sector

  • Number of directors covered

  • Claims history

  • Level of cover and policy limit selected

  • Whether the business has external investors or is publicly listed

Small businesses may pay from a few hundred pounds a year for basic cover, while larger companies with higher risk profiles can pay significantly more. Comparing multiple insurers is the best way to find competitive pricing for your specific circumstances.

How to Choose the Right D&O Policy

When comparing D&O insurance, consider:

  • Policy limit: Is the cover level adequate for your company's size and risk exposure?

  • Side A, B, and C cover: Does the policy include all three, or just some?

  • Retroactive cover: Does it cover past acts, or only those from the policy start date?

  • Run-off cover: What happens if a director leaves or the company is sold?

  • Exclusions: Are there gaps that leave key risks uninsured?

What is Professional Indemnity Insurance?

Professional Indemnity (PI) insurance covers claims made against a business or individual for financial loss caused by professional advice, services, or work that turns out to be negligent, inaccurate, or incomplete. It's distinct from D&O insurance, which covers management and governance decisions rather than the quality of professional services or advice delivered to clients.

  • PI insurance typically responds to claims involving:

  • Negligent advice or errors in professional services

  • Breach of professional duty of care

  • Loss of documents or data belonging to a client

  • Defamation arising from professional work

  • Intellectual property infringement in the course of delivering services

It's commonly required for consultants, accountants, solicitors, architects, financial advisers, and other professionals who provide advice or expertise as part of their work. Many professional bodies and regulators make PI cover a mandatory condition of membership or practice.

Compare Professional Indemnity Insurance

What is Corporate Legal Liability (CLL) Insurance

Corporate Legal Liability (CLL) insurance is a broader form of cover that combines D&O insurance with other liability protections into a single policy. Rather than insuring directors alone, CLL extends protection to the company and its management team together, often bundling in:

  • D&O liability: Protecting individual directors and officers.

  • Employment practices liability (EPL): Covering claims like unfair dismissal, harassment, or discrimination brought by employees.

  • Corporate legal liability/entity cover: Protecting the company itself against claims of mismanagement.

CLL policies are typically aimed at small and medium-sized businesses that want broader protection without purchasing several separate policies. The combined structure can be more cost-effective than buying standalone D&O, EPL, and entity liability cover individually, and it simplifies claims handling since one insurer manages the whole package.

Glossary

  • Indemnity: A commitment by the company (or insurer) to cover a director's losses or legal costs arising from their role.

  • Side A/B/C Cover: The three standard components of a D&O policy: direct director protection, company reimbursement, and entity cover.

  • Run-off Cover: Extended insurance protection for claims made after a director leaves the company or the business is sold/wound up.

  • Wrongful Trading: Continuing to trade when a company's directors knew, or should have known, there was no reasonable prospect of avoiding insolvency.

  • Corporate Legal Liability (CLL) Insurance: A combined policy bundling D&O, employment practices liability, and entity cover for a company and its management team.

  • Employment Practices Liability (EPL): Cover for claims brought by employees, such as unfair dismissal, discrimination, or harassment.

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Editorial Disclaimer: This content is provided for general informational purposes only and should not be considered advice. It is not intended to provide personalised recommendations or guarantees of any outcomes.
This content reflects general information at the time of publication and is not endorsed by any company. You should always consider your own circumstances and, where appropriate, seek independent advice before making decisions. Nothing in this content should be interpreted as a recommendation to take, or refrain from taking, any specific action.

Page Last Reviewed: 24/09/2026