The short answer
Directors and officers insurance, often called D&O or management liability, protects the people who govern and manage an organization when they are sued or investigated over decisions they made in that role. It pays defence costs and, within limits, settlements. A policy can also protect the company itself. A licensed broker places it with insurers who write for your type of organization.
- Privately held companies with a board, shareholders or outside investors
- Founders preparing to bring on investors, who will ask for it in the term sheet
- Not-for-profit boards, condominium corporations and cooperatives
- Volunteer directors who want to understand their personal exposure
- Businesses that employ people, deal with regulators or raise money and want a single package of management protections
1 licensed broker in the network handles this. In Alberta, Canada, a request for directors and officers insurance can be offered to up to three of them, chosen because they are licensed for this line and place. They are test brokers while we are in demo.
See the brokers → Outside Alberta, Canada you can prepare and save a request today; sending opens place by place. Brokers answer with their own quotes. Broker.insure does not quote, advise or take commission.
01 / What it covers
The parts worth understanding
Side A: individuals
Protects directors and officers personally when the organization cannot or may not indemnify them, such as in insolvency or where the law prohibits it. This is the core purpose of the cover.
Side B: reimbursement
Reimburses the organization when it pays defence costs or settlements for its leaders. The policy may ask the company to keep a retention, which is the amount it pays before the insurer does.
Side C: the entity
Some policies also protect the organization itself. The scope differs: private companies often get it for any claim, public ones only for securities claims. Ask what is included for your organization.
Regulatory and investigation costs
Responding to a regulator or an inquiry about governance, tax filings, employment standards or environmental compliance can be costly. Ask which kinds of proceeding are covered and from what point, such as an informal request versus a formal notice.
Exclusions that matter
Policies commonly exclude fraud, deliberate wrongdoing, bodily injury and property damage, pollution and claims by one insured against another. Read the conduct and insured-versus-insured exclusions closely.
Run-off and change in control
If the company is sold or merged, the policy may convert to run-off, protecting the former leaders for earlier decisions for a defined time. Ask how it works before a transaction, not during it.
02 / Get ready
Bring this, and expect these questions
Gather
- The legal name, structure and incorporation details of the organization and any subsidiaries
- A list of directors and officers with their roles and how long they have served
- The latest financial statements, and a plain description of revenue sources and any outside funding
- Number of employees, volunteers and, where relevant, members or shareholders
- Any lawsuits, regulatory notices, audits or complaints involving the organization in recent years
- Planned changes such as raising money, selling the business, a merger or a wind-down
- Governance documents, including bylaws, shareholder agreements and conflict-of-interest policies
- Existing policies: general liability, professional liability, employment practices and any current management liability
- Details of any indemnity agreements between the organization and its directors
A broker will ask
- What does the organization do, how is it governed and who sits on the board?
- Has it faced a lawsuit, a regulatory inquiry or a significant dispute?
- How are decisions made and recorded, and are there conflicts of interest policies?
- Does the organization raise money from investors, members or the public?
- Are any directors serving as volunteers, and do they have outside roles that matter?
- Is any restructuring, sale or insolvency risk on the horizon?
- Do the bylaws or an agreement promise to indemnify directors, and to what extent?
- Do you need employment practices, fiduciary or crime cover with it?
Not sure of an answer? Leave it. "Not known yet" is a fine answer, and a broker will help you fill it in.
03 / Build your request
Answer a few questions. Get your own list.
Pick what fits. Your answers shape the list beside them, and they are saved to your request as plain facts a broker can read. "Not sure yet" is always a fine answer.
04 / Three situations
See which one sounds like yours
A start-up preparing to close a funding round
A software company in Toronto is about to accept an investment from a venture firm. The term sheet asks that the company hold directors and officers insurance and name the new investor's representative on the board.
First steps. Read the term sheet wording on cover and gather the cap table, financial statements and a list of the board. Ask the broker how the new director is added, whether the entity is covered, and how a later funding round or sale affects the policy.
The board of a condominium corporation
Five owners volunteer on a condominium board in Edmonton that is dealing with a special levy and a dispute with a contractor. One of them has asked what personal protection she has if an owner sues the board over the levy.
First steps. Gather the bylaws, the board list, the recent minutes and the existing insurance documents. Ask the broker how the corporation's policy treats volunteer directors, what disputes are excluded, and how a claim by one owner against the board is treated.
A family manufacturing business in transition
A third-generation manufacturer is planning to sell the company to a larger buyer within two years. The founder, now chair, wonders what protects her and the other officers after the sale for decisions made earlier.
First steps. Gather the shareholder agreement, financial statements and any dispute history. Ask the broker how change-in-control and run-off provisions work, and whether tail cover should be arranged in advance of negotiations or only after a deal is signed.
05 / Words you will hear
The jargon, in plain words
- Retention
- The portion of a covered loss that the organization pays first, before the insurer steps in. Larger retentions tend to be seen with larger organizations.
- Insured versus insured
- A clause removing cover when one insured party sues another, such as a director suing the company. It can matter in family firms and partner disputes.
- Indemnification
- A promise, in bylaws or an agreement, that the organization will pay for a leader's legal costs and losses. The policy can reimburse the organization when it keeps that promise.
- Run-off cover
- Protection that continues for former leaders after a sale or merger, for decisions made before it. The buyer's new policy generally addresses decisions made afterwards.
- Entity cover
- An optional part that protects the organization itself, not only its people. How broad it is differs between private, public and not-for-profit bodies.
06 / Common mistakes
What trips people up
- Assuming general liability or the company's other policies protect directors personally for governance decisions.
- Not reading the exclusion for claims between insured parties, which can matter in family or partner disputes.
- Treating a volunteer board as having no exposure because nobody is paid.
- Waiting until a sale or a dispute is under way before asking how the policy treats a change of control.
- Failing to report a regulatory letter or a threatened claim during the policy period.
- Letting the company's indemnity promises and the policy wording drift apart.
Ready when you are
Turn this into one clear request.
Save it, add what you know, and choose when to send it. A licensed broker who handles directors and officers insurance takes it from there.
07 / Questions people ask
Straight answers
What is directors and officers insurance?
It is a policy that protects the people who govern and manage an organization if they are sued or investigated over decisions in that role. It pays defence costs and, within limits, settlements, and it often reimburses the organization if it indemnifies those people. It generally does not cover bodily injury or deliberate wrongdoing.
Do small private companies need directors and officers insurance?
Any company can have a claim from shareholders, employees, creditors, regulators or competitors. Investors, lenders and partners often ask for it. Whether it makes sense depends on the structure, the number of stakeholders and the contracts you are signing. A licensed broker can discuss what is common for an organization like yours.
Are volunteer directors of a not-for-profit protected?
Volunteers can be named in claims too, though their legal protection depends on the jurisdiction, the organization's bylaws and the policy. A directors and officers policy can reduce the personal exposure. Ask the broker how volunteers are defined in the wording and whether the organization indemnifies them.
What is the difference between directors and officers and professional liability?
Professional liability protects against claims that your services were negligent. Directors and officers cover protects leaders against claims arising from governing or managing the organization, such as shareholder or regulatory disputes. A business may need both, and the policies exclude each other's subject matter. A broker can explain which one fits.
What does insured versus insured mean?
It is an exclusion for claims brought by one insured person or entity against another, for example one director suing another or the company suing its own officers. Exceptions exist for some situations, such as claims by a bankruptcy trustee. It matters in closely held businesses, so ask how the wording handles disputes between owners.
What happens to directors and officers cover when a company is sold?
Most policies convert to run-off on a change in control, so earlier decisions remain covered for a defined time while new decisions fall under the buyer's policy. The terms, cost and length vary. Raise it with the broker early, since the options are usually easier to arrange before a deal closes.
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General information, not insurance advice. Broker.insure is a directory and request service: it is not an insurer and does not quote, bind or advise. Policy terms, availability and what is required where you live depend on your situation and on licensed professionals. Updated 2026-10-31.