What D&O insurance covers
Directors' and officers' (D&O) insurance protects the people who run a company, not the company itself. Directors can be personally liable — with personal assets at stake — for alleged wrongful acts in running the business: breaches of duty, regulatory investigations, employment claims brought against them personally, or claims from shareholders, creditors and insolvency practitioners.
D&O pays the legal costs of defending such claims and any awards, from the moment an investigation or claim begins. Defence costs are the point: even an unfounded investigation can cost a director six figures to answer properly.
Who needs it?
Any limited company's directors carry these duties — company size is no shield, and small-company directors are if anything more exposed because they wear every hat. Exposure is higher where a company has external shareholders or investors, employs staff (employment-practice claims), operates in regulated sectors, or is anywhere near financial difficulty — insolvency is where directors' personal liability bites hardest.
Investors and non-executive directors frequently require D&O in place before joining a board.
What it doesn't cover
Fraud and deliberate wrongdoing are excluded (though defence costs are usually covered until dishonesty is established). Fines that are legally uninsurable stay uninsurable. Claims between insured directors can be restricted, and D&O doesn't cover the company's own operational liabilities — that's what the rest of your business cover does.
How much cover do you need?
Limits of £1m–£5m are common for SMEs. Size it against your sector's regulatory intensity, headcount, and investor expectations — funding agreements often name a figure. Like professional indemnity, D&O is written on a claims-made basis: keep it continuous, and consider run-off cover when leaving a board or closing a company, since claims can arrive years after the events.
Getting the right policy
D&O wordings vary more than most covers — who counts as insured, investigation cover, and insolvency carve-outs all differ. A specialist broker will match the wording to your board's actual exposure. Find a business insurance specialist through Nesto — free, no obligation.