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Directors and officers insurance cost
The cost of directors and officers insurance (D&O) varies based on a number of factors about your business. Your premium is directly impacted by the type of work you do, the size of your business, industry risk, and more.
What is the average cost of D&O insurance?
Small businesses pay an average premium of $138 per month, or $1,653 annually, for directors and officers insurance.
Our figures are sourced from the median cost of policies purchased by Insureon customers from leading insurance companies. The median offers a better estimate of what your business is likely to pay because it excludes outlier high and low premiums.
Typical directors and officers insurance costs for Insureon customers
While Insureon's small business customers pay an average of $138 monthly for directors and officers liability insurance, 41% pay less than $100 per month for their policies, and another 25% pay between $100 and $300 monthly.
The cost varies for small businesses depending on their risks and the coverage they choose.
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Understanding D&O insurance cost factors
Insurance company underwriters consider several factors when determining how much to charge for a D&O insurance policy, including:
- Industry risks
- Coverage limits and deductible
- Number of directors on the board
- Number of employees
- Location
- Annual revenue
- Risk management
- Claims history
Coverage limits and deductible
If you want a D&O policy that covers more expensive lawsuits, you’ll need to increase your coverage limits—which means you’ll pay a higher premium to your insurance company.
The limits on directors and officers insurance coverage can vary significantly. Each policy has a per-occurrence limit and an aggregate limit:
- Per-occurrence limit. While the policy is active, the insurer will pay up to this amount to cover any single claim.
- Aggregate limit. During the lifetime of the policy (usually one year), the insurer will pay up to this amount to cover claims.
When buying a policy, it's a good idea to make sure the deductible is something you can easily afford. If you can’t pay for it in a crisis, your insurance won’t activate to cover your claim. The average deductible that Insureon customers select for D&O insurance is $2,500.
The right amount of coverage depends on your business needs. You want coverage that will cover a potential lawsuit, without buying more than you need. Chat with a licensed insurance agent if you're unsure which exclusions or deductible and limits are right for your small business or startup.
Industry risks
Your industry can have a big impact on your premium.
Industries where directors’ decisions carry more weight on business outcomes tend to face higher risks—and higher insurance costs. For example, manufacturing and technology businesses often have to make large upfront investments and rely heavily on their directors’ strategic choices.
As a result, manufacturers pay an average of $596 per month and technology businesses typically pay $517 per month for this coverage. These industries often face lawsuits related to board-level decisions that can significantly affect the company’s financial health.
Healthcare professionals fall somewhere in the middle, paying about $319 per month. Their directors make important calls around compliance and patient care, which carry real risk, but not quite at the same scale as industries with heavy capital investments.
In contrast, nonprofits pay an average of only $67 per month. Their boards usually focus more on managing grants or donor budgets rather than making high-stakes investment decisions, which means fewer lawsuits tied to director actions and therefore much lower premiums.
Top industries we insure
To see insurance costs for businesses in your industry, visit our industry-specific cost analyses.
Don't see your industry? Don't worry. We insure most businesses.
Do I need D&O insurance?
Though it's not required by state law like workers' compensation, D&O insurance is equally important when you have a board of directors. Additionally, some private equity and venture capital firms may require this coverage before investing in a startup.
Each time a board member makes a decision on behalf of your business, a lawsuit is a possibility. An employee could file a wrongful termination claim, or the board of directors could be held responsible for misrepresentation or a breach of fiduciary duty.
When someone sues your business—even if it's a frivolous lawsuit—you'll have to pay legal defense costs, such as the cost of hiring an attorney. If you lose the suit, you could face significant financial losses in a court-ordered judgment or a settlement.
D&O insurance covers all of these costs, which could save your business from bankruptcy. It also helps attract top talent to your business, since potential candidates know their personal assets will be protected in the event of a lawsuit.
Because the premium is based upon your risk profile and industry, many small businesses pay only a small monthly premium for this coverage.
How can you save money on D&O insurance?
Directors and officers liability insurance benefits both private companies and public companies. Regardless of business type, there are steps you can take to keep your costs low, such as:
Bundle policies. Many insurers offer options to purchase different types of coverage together for a discount. You can often bundle D&O coverage with other types of management liability insurance, such as employment practices liability insurance (EPLI).
Shop around and compare quotes. Premiums can vary significantly between insurers, so it pays to get multiple quotes. Comparing coverage options ensures you’re getting the best protection at a competitive price.
Pay your entire premium upfront. While it's tempting to pay the low monthly premium, many insurance companies offer a discount when you pay the full annual premium instead.
Proactively manage your risks. A comprehensive risk management plan can help you avoid D&O claims, which helps keep your premium low. For example, you might:
- Form internal protocols for hiring and firing employees to improve retention
- Respond promptly to claims of harassment
- Standardize the decision-making process to ensure board decisions are well-informed
- Institute a formal review process for important decisions
Why do small business owners choose Insureon?
Insureon is the #1 independent agency for online delivery of small business insurance.
We help business owners get peace of mind by comparing quotes from top-rated providers, buying policies, and managing their coverage online. By completing Insureon’s easy online application today, you can get free quotes for directors and officers insurance and other business insurance policies from top-rated U.S. insurance companies.
Our insurance agents are available to help answer any questions you may have, such as the differences between Side A, Side B, and Side C in a D&O policy.
Once you find the right coverage for your small business, you can begin coverage in less than 24 hours and get a certificate of insurance for your small business.
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Learn more about business insurance costs
Premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific type of insurance coverage.
Updated: January 10, 2024