Directors & Officers Insurance in a nutshell
It protects board members and officers who are sued by customers, partners, competitors or regulators over decisions they make for the company. It covers legal defense (i.e. attorneys) costs and potential settlements, that otherwise would need to be paid from the personal pockets. It covers them even if they leave the startup.
Most companies buy it after raising a new round of financing, to comply with a requirement of the term sheet and the investors since they will likely put someone on the board and they want that person to be covered from legal liability.
After raising a series A, startups pay $9,600/yr on average. As a rule of thumb, if you have less than $50M in revenue, it will cost you ~$4K annually per $1M limit of coverage. Although prices can start at as low as $500 per $1M of coverage. And startups usually purchase limits between $1M and $3M.
Note: there are certain industries that have higher D&O risks (e.g., fintech or healthcare), so prices can be higher.
After submitting the application you get a quote estimation (i.e., you know the price). But before you can purchase it and activate the policy, someone at CoverWallet will need to manually verify the information provided and may request from you supporting documentation (e.g., financials).
Median cost of D&O Insurance for startups
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