by Geoff Stanton | May 1, 2025

directors and officers insurance cost: 5 Powerful Facts 2025

Understanding D&O Insurance Costs: The Essentials

When your board members gather around that conference table to make important decisions, they’re not just steering your organization—they’re potentially putting their personal assets on the line. That’s where D&O insurance becomes invaluable.

Directors and officers insurance cost varies widely based on your organization’s profile. Nonprofits typically enjoy the most affordable rates, ranging from $600-$1,700 annually. Private companies generally pay $5,000-$10,000 per $1M of coverage, while public companies face the highest premiums at 0.25%-5% of coverage limits. For the average small business, expect to budget about $138 monthly (or $1,653 per year) for this crucial protection.

Let me break this down in a way that makes sense for your planning:

Organization Type	Average Annual Premium	Typical Policy Limit	Average Deductible
Nonprofit	$600-$1,700	$1 million	$1,000-$2,500
Small Private Business	$1,653	$1 million	$2,500
Mid-sized Private Company	$5,000-$10,000 per $1M	$2-5 million	$10,000-$25,000
Public Company	0.25%-5% of limit	$10+ million	$100,000+

Think of directors and officers insurance cost as an investment in leadership stability. Without this coverage, talented executives might think twice before joining your board. After all, who wants to risk their home, savings, or retirement funds because of a business decision? This protection helps you attract and retain the best minds to guide your organization.

Your premium won’t be pulled from thin air—insurers look at specific factors that reflect your risk profile. Organization size matters significantly—more revenue, assets, and employees typically mean higher premiums. Your industry plays a major role too, with technology and healthcare companies generally paying more due to heightened regulatory scrutiny and litigation risks.

Your claims history speaks volumes to insurers. A clean record keeps costs lower, while previous lawsuits signal caution flags that drive up premiums. The coverage limits you select directly impact cost—more protection means higher premiums. However, choosing a higher deductible can help offset some of these expenses. Even your location affects pricing, with states like California typically commanding higher rates due to their litigious environment.

I’m Geoff Stanton, President of Stanton Insurance Agency, and I’ve spent over 20 years helping organizations steer these complex waters. As a Certified Insurance Counselor, I’ve seen how the right D&O coverage provides peace of mind while keeping costs manageable. Every organization’s needs are unique, and finding that sweet spot between protection and affordability is what we do best.

Want to dive deeper into protecting your leadership team? Check out our related resources:

D&O Insurance 101 – Definition, Coverage & Why It Matters

Ever wonder what happens when a business decision goes sideways and people start pointing fingers at your leadership team? That’s where Directors and Officers (D&O) insurance comes in – it’s like a financial shield for the people running your organization.

Born from the ashes of the 1929 stock market crash, D&O insurance protects the personal assets of your corporate leaders and their spouses when they’re sued for decisions made while steering your company. Without it, your board members could lose their homes, savings, and investments – all because they volunteered or worked for your organization.

Modern D&O policies typically come in three flavors (insurance folks call them “sides”):

Side A Coverage: Protects individual directors and officers when your company can’t legally indemnify them – this is the last line of defense for their personal bank accounts.
Side B Coverage: Reimburses your organization when it covers legal costs for directors and officers.
Side C Coverage: Shields the organization itself from securities claims (for public companies) or other covered claims (for private companies and nonprofits).

This three-sided approach ensures everyone has protection – from your volunteer board treasurer to your full-time CEO.

What Does a D&O Policy Cover?

When leadership decisions lead to lawsuits, D&O insurance steps in to cover critical expenses like:

Legal defense costs often make up the biggest chunk of D&O claims – and with good reason. Even frivolous lawsuits can rack up six-figure legal bills before they’re dismissed. Your policy covers attorney fees, court costs, and other expenses needed to mount a proper defense.

Settlements and judgments get covered when it makes sense to resolve a case rather than fight it out in court. This can save your organization from the uncertainty and publicity of a prolonged legal battle.

Regulatory investigations are increasingly common in today’s complex compliance environment. Your D&O policy helps cover the costs of responding to government inquiries, which can be extensive even when no wrongdoing is found.

Shareholder derivative suits – where shareholders sue directors on behalf of the company itself – are also typically covered. Just ask the former directors of Goldman Sachs who faced a $79.5 million settlement related to the 1MDB scandal. Their D&O coverage proved invaluable in that situation.

Your policy also typically covers claims involving misrepresentation of company finances, misuse of funds, breaches of fiduciary duty, regulatory compliance failures, and in some cases, employment-related issues (especially when bundled with Employment Practices Liability Insurance).

Common Exclusions You Should Spot Early

While D&O insurance provides robust protection, it’s not a blank check. Most policies won’t cover:

Fraud and criminal acts that are intentional. If a final court ruling determines someone acted criminally or dishonestly, coverage typically vanishes for that individual (though innocent directors remain protected).

Prior claims and known circumstances aren’t covered – you can’t buy insurance for a house that’s already on fire, and the same principle applies here.

Bodily injury and property damage claims belong under general liability policies, not D&O coverage.

Pollution claims are typically excluded or limited, as environmental liabilities can be massive and unpredictable.

Insured vs. insured exclusions prevent coverage when one insured party sues another, though many modern policies make exceptions for shareholder derivative actions.

Personal profit from illegal activities isn’t covered – if a director illegally enriches themselves, they’re on their own.

Understanding these exclusions is crucial when evaluating policies. Some can be modified through endorsements, though this typically affects your directors and officers insurance cost.

For organizations of all sizes – from small nonprofits to public companies – D&O insurance has become essential for attracting and retaining talented leadership. After all, few qualified people will risk their personal assets to serve on a board or as an officer without this protection.

More info about liability coverage

Directors and Officers Insurance Cost & Key Factors

When budgeting for leadership protection, understanding what drives directors and officers insurance cost helps you make smarter decisions. The good news? About 41% of small businesses pay less than $100 monthly for their D&O coverage, with the average premium sitting at a manageable $138 per month.

Your premium isn’t pulled from thin air – it’s calculated based on your organization’s unique risk profile. Think of it like a recipe where each ingredient matters: your organization type, financial health, employee count, industry, claims history, coverage choices, location, and future plans all blend together to create your final price.

I’ve seen how these factors play out differently for each client. A small tech startup in California might pay twice what a similar-sized manufacturing company in Ohio pays, simply due to industry and location differences.

Typical Price Ranges by Organization Type

The cost variance between different types of organizations can be striking:

For nonprofits, D&O insurance is refreshingly affordable. Minimum premiums typically start around $600 (or $690 if you’re in litigation-happy California). Most nonprofits with employees pay between $1,000-$1,725 annually, with the average sitting at just $67 monthly. This typically represents only 0.03% to 2% of your coverage limit – a small price for peace of mind.

Private companies face a different cost structure. The average small business pays about $1,653 annually ($138 monthly). If your company has revenues up to $50 million, expect to pay $5,000-$10,000 for each $1 million of coverage. For startups, your funding round often dictates pricing – from $3,500-$6,000 with under $10M in funding to $10,000-$15,000 when you’ve raised $50-100M.

Public companies bear the heaviest premium burden, typically paying 0.25% to 5% of their coverage limits. The exposure to shareholder litigation and regulatory scrutiny drives these higher costs, particularly in heavily regulated industries.

As one of our carrier partners often tells clients, “The price per $1 million of D&O coverage decreases as you purchase higher coverage limits.” This volume discount means higher limits can sometimes be more cost-effective on a per-million basis.

How Limits & Deductibles Shape the Bill

Your coverage choices significantly impact your directors and officers insurance cost. Think of limits and deductibles as two sides of the same coin – adjusting either affects your premium.

Policy limits come in two flavors: per-occurrence (the maximum paid for any single claim) and aggregate (the maximum paid for all claims during the policy period). Most small businesses start with $1 million in coverage, though your industry, size, and risk tolerance might suggest more.

The typical D&O policy deductible hovers around $2,500 for small businesses. Raising this amount lowers your premium but increases what you’ll pay out-of-pocket when a claim occurs. Small businesses typically choose deductibles between $1,000-$5,000, while mid-sized companies opt for $10,000-$25,000. Large or public companies often carry deductibles of $100,000 or more.

I always advise clients to select a deductible they can comfortably afford to pay in a crisis. As I tell my clients, “The cheapest insurance becomes the most expensive when you can’t afford to use it.”

Industry, Size & Location Surcharges

Some factors driving directors and officers insurance cost are simply beyond your control.

Your industry’s inherent risk profile creates significant premium variations. Technology companies often pay north of $500 monthly due to rapid innovation cycles and intellectual property concerns. Healthcare organizations face higher premiums due to regulatory complexity, while financial services firms pay more because of fiduciary obligations. Manufacturing and biotech/pharmaceutical companies also face industry-specific surcharges.

Size matters too. More employees, higher revenue, greater assets, and broader market reach all translate to increased premium costs. As one underwriter bluntly put it to me, “It’s simple: the more employees you have, the more opportunities there are for a lawsuit.”

Your location significantly impacts your premium as well. California businesses typically face higher minimum premiums ($1,725 vs. $1,000 elsewhere for nonprofits). Other states with litigation-friendly environments like New York, Florida, and Delaware (where many companies incorporate) also tend toward higher rates. International operations can further complicate your pricing due to global regulatory differences.

Finally, your claims history follows you. Organizations with prior D&O claims typically face premium increases of 10-50%, depending on the severity and frequency of those claims. A scientific research study on nonprofit lawsuits found that organizations in certain states faced up to 40% higher premiums regardless of their individual claims history – simply because of their location’s litigation environment.

At Stanton Insurance Agency, we specialize in finding the sweet spot where coverage meets affordability for your specific situation. Every organization deserves leadership protection they can actually afford.

Getting a Quote & Smart Ways to Save Money

Navigating the D&O insurance market doesn’t have to be complicated or expensive. At Stanton Insurance Agency, we’ve helped hundreds of organizations find the right coverage while keeping costs manageable. Let me walk you through the process and share some money-saving strategies we’ve seen work time and again.

Step-by-Step Quote Process

The journey to securing D&O coverage begins with gathering the right information. Think of it as preparing for a financial physical—we need to understand your organization’s health and potential risk areas.

When clients come to us for quotes, we first collect essential documents like financial statements, corporate structure details, and a roster of your leadership team. Your claims history (typically covering the last 5 years) tells insurers a lot about your risk profile. We’ll also need a clear description of your operations and employee count.

Next comes the application phase, where key executives will need to sign off on standard D&O forms. If you’ve had prior claims, additional supplements will be required. Some industries face unique risks, so don’t be surprised if there are sector-specific questionnaires to complete.

Once submitted, underwriters typically take 7-10 business days to evaluate your risk factors. They’re looking at everything from financial stability to governance practices. Sometimes they’ll come back with questions—that’s normal and actually helps ensure you get appropriate coverage.

The most valuable part of working with our agency comes next—quote comparison. We help you review not just the premiums, but the coverage terms, exclusions, deductibles, and the financial strength of each insurer. Those details matter enormously when a claim occurs. Once you select your preferred option, we’ll help finalize any outstanding questions, submit payment (typically 20-25% down if financing), and deliver your policy documents.

Proven Premium-Reduction Tactics

Over two decades in the business, I’ve seen certain strategies consistently help reduce directors and officers insurance cost without cutting essential protections. These aren’t just theoretical—they’re approaches we’ve helped clients implement with real savings.

Bundle your policies for immediate savings. Combining D&O with Employment Practices Liability Insurance (EPLI) typically cuts costs by 10-15%. Many of our clients opt for management liability packages that include D&O, EPLI, and Fiduciary Liability, which insurers often price more competitively than standalone policies. As one client put it, “I was surprised how much we saved just by bundling policies we needed anyway.”

Pay annually instead of monthly if your cash flow allows. This simple change can save 5-10% on your premiums by eliminating installment fees. It also simplifies budgeting, giving you one less monthly expense to track.

Implement robust risk management practices that insurers love to see. Clear governance protocols, documented decision-making processes, and formal review procedures for key business decisions can significantly impact your premium. One nonprofit client of ours reduced their directors and officers insurance cost by 22% after implementing a board governance training program and improving their documentation practices.

Choose appropriate deductibles for your financial situation. We often find organizations defaulting to the lowest deductible without considering alternatives. Moving from a $2,500 to $5,000 deductible might save 10-15% on premiums. The question to ask is: what deductible amount would be manageable in a crisis while helping reduce your ongoing costs?

Review coverage annually to ensure it still aligns with your needs. Organizations change, and yesterday’s perfect policy might have gaps or unnecessary components today. We help clients identify emerging risks that need addressing and features they may no longer need.

Working with an experienced broker (like our team at Stanton Insurance Agency) gives you access to multiple carriers and negotiating power that’s hard to match on your own. We know which insurers offer the best terms for specific industries and organization types, helping you find the sweet spot between comprehensive protection and affordable premiums.

The cheapest policy isn’t always the best value. The true cost of D&O insurance includes what you might have to pay out-of-pocket if coverage falls short. Our goal is finding protection that’s both affordable now and reliable when you need it most.

Frequently Asked Questions about Directors and Officers Insurance Cost

How much D&O coverage do we really need?

Determining appropriate coverage limits depends on several factors:

Organization size and assets: Larger organizations typically need higher limits
Industry risk profile: Higher-risk industries require more protection
Litigation environment: Organizations in litigious sectors or regions need higher limits
Board composition: High-profile directors may attract more claims
Contractual requirements: Some contracts or partnerships may specify minimum coverage

A common rule of thumb is to secure coverage equal to 1% of your organization’s assets or annual revenue (whichever is greater), with a minimum of $1 million. However, this varies significantly by organization type.

For public companies, D&O limits often range from $10 million to over $100 million. Private companies typically carry $1-10 million, while nonprofits often start with $1 million in coverage.

As one expert advises, “Money spent on broad coverage from a quality carrier is always better than cheap policies with poor contractual terms.”

Does coverage extend to former directors and employees?

Yes, D&O policies typically cover former directors, officers, and employees for actions taken while they were with the organization. However, there are important considerations:

Standard policy language: Most policies define “insured persons” to include former directors and officers
Tail coverage: Also called “extended reporting period” or “findy period”
Tail policy cost: Typically 100-300% of the annual premium, depending on the extension length

For organizations undergoing leadership changes, mergers, or acquisitions, securing appropriate tail coverage is crucial. This ensures protection continues for former leaders even after they’ve left the organization or after the policy terminates.

The coverage period for former directors is typically limited to actions taken during their tenure and claims made during the policy period or extended reporting period. Some policies cover past directors for up to three or four years post-departure.

What’s the difference between D&O and E&O or EPLI?

These policies cover different risks, though there can be some overlap:

D&O Insurance:

Protects directors and officers from claims related to management decisions
Covers breaches of fiduciary duty, misrepresentation, regulatory violations
Focuses on leadership liability

Errors & Omissions (E&O) Insurance:

Also called Professional Liability Insurance
Covers claims related to professional services and advice
Protects against allegations of negligence or inadequate work
Focuses on operational errors rather than management decisions

Employment Practices Liability Insurance (EPLI):

Covers claims related to employment practices
Protects against allegations of discrimination, harassment, wrongful termination
Often bundled with D&O for comprehensive protection

While D&O insurance focuses on management decisions, E&O covers professional services, and EPLI addresses employment-related claims. Many organizations need all three types of coverage for comprehensive protection.

As one insurance expert explains, “D&O covers directors and officers specifically, while E&O protects all employees for professional service mistakes.” Understanding these distinctions helps ensure appropriate coverage without gaps or unnecessary overlap.

Conclusion

Navigating directors and officers insurance cost might seem daunting at first, but finding the right coverage is well worth the effort. Whether you’re a small nonprofit paying $600 annually or a public company investing millions in protection, D&O insurance serves as a critical shield for your leadership team and organization.

After exploring the ins and outs of D&O coverage, several important points stand out:

Organizations of all types need this protection, though costs vary dramatically. Your nonprofit might pay under $1,000 annually, while a public company in a high-risk industry could invest hundreds of thousands for the same peace of mind. This price difference reflects the vastly different risk profiles these organizations face.

The premium you’ll pay depends on a blend of factors unique to your situation. Your industry, company size, location, and claims history all play significant roles in determining what you’ll pay. Financial stability matters too – insurers look closely at your balance sheet when calculating risk.

Thankfully, there are practical ways to manage your directors and officers insurance cost without sacrificing protection. Bundling policies often saves 10-15%, while implementing strong governance practices can lower your risk profile in insurers’ eyes. Even simple choices like paying annually instead of monthly can trim your premium by 5-10%.

Perhaps most importantly, D&O coverage isn’t a “set it and forget it” solution. As your organization evolves, so should your insurance protection. What worked perfectly last year might leave dangerous gaps as your company grows or changes direction.

Here at Stanton Insurance Agency, we’ve guided countless organizations through the D&O insurance landscape. Our team works with clients throughout Massachusetts, New Hampshire, and Maine to find that sweet spot where comprehensive coverage meets budget-friendly premiums.

We strongly recommend reviewing your D&O policy annually – or whenever your organization undergoes significant change. Has your board composition shifted? Are you entering new markets? Have you significantly grown your team? These milestones should trigger a fresh look at your coverage.

Ready to explore your options or review your current D&O policy? Contact our Business Insurance team today. We’ll walk you through the process, explain your options in plain English, and help you secure quotes from leading carriers that match your specific needs.

Protecting your leadership team shouldn’t require a financial sacrifice. With the right guidance, you can find robust coverage that fits comfortably within your budget. Let us help you strike that balance.