How to Buy Directors and Officers Insurance: A Step-by-Step Guide for Small Businesses and Nonprofits

When you think about Directors and Officers (D&O) liability insurance, you might imagine Fortune 500 companies with massive boards and global stakeholders. But the truth is, D&O insurance isn't just for big corporations. In fact, it can be a crucial protection for small businesses and nonprofits whose leaders are exposed to personal liability risks every day.  Any business or nonprofit organization with multiple stakeholders can have disputes over how the organization’s assets are managed.  That’s where Directors and Officers Liability Insurance comes in.

If you’re wondering how to buy D&O insurance and make sure your organization is covered properly, this guide will walk you through the process step by step.

Directors and Officers are critical to an organization's success

Step 1: Understand What Kind of Coverage You Need

Before you can buy a policy, you need to understand what kind of D&O coverage makes sense for your specific situation.  Many nonprofits reach out to me because they want to make sure the “directors and officers” are covered.  Keep in mind, there are different liability coverages to protect the organization and the people in it for different kinds of lawsuits.

Ask yourself:

• Are you a private company or a nonprofit?

• Do you have a board of directors, officers, or decision-makers who guide your strategy?

• Do you have multiple owner or stakeholders?

• Are you raising capital, managing funds, or dealing with any regulatory oversight?

• Do you have employees, volunteers, investors, or members who could potentially file a claim?

D&O insurance protects your leadership against claims such as:

• Mismanagement of funds

• Breach of fiduciary duty

• Failure to comply with bylaws or legal obligations

Organizations of all sizes can be victims of these kinds of claims.  And sometimes, Directors and Officers Liability insurance is a necessity for recruiting high quality board members for a nonprofit.

So whether you’re running a community nonprofit or a startup with a few angel investors, D&O insurance can provide peace of mind and financial protection.

Pro Tip: Think beyond today—consider the risks your organization might face as it grows.

Step 2: Talk to a Specialist

This is where the DIY route could cost you.

D&O insurance for small businesses and nonprofits isn’t one-size-fits-all. Industry-specific risks, local regulations (especially if you’re based in states like Maryland), and organizational structure can all affect your policy.

For example:

• A tech startup’s risks will differ significantly from a political advocacy group or membership-based association.

• A nonprofit with volunteers in multiple locations may need different coverage than a private company with employees in one office.

A qualified insurance advisor can help you:

• Identify your unique exposure

• Avoid common coverage gaps

• Choose a policy limit (often starting at $1 million)

• Decide whether to bundle D&O with cyber liability, crime insurance, or employment practices coverage

Helpful Hint: Directors and Officers Insurance is often sold as part of a bundle under the name “Management Liability Insurance”.  That’s how you can pair D&O with other coverages like crime, employment practices, or cyber insurance.

Step 3: Complete the Application

Once you know what coverage you need, it’s time to fill out an application. Don’t worry—it looks scarier than it is, especially with a good agent at your side.

You’ll likely need to provide:

• Annual revenue and expenses

• Net income or financial statements

• Leadership structure and bios

• Prior or pending legal claims (if any)

• Risk management or compliance procedures

This information helps underwriters evaluate your organization’s risk profile and decide whether to offer coverage—and at what price.

Insider Insight: Strong financials, good claims history, and good governance practices make you more attractive to insurers, often leading to better rates.  I’ve been in situations where rates have doubled when any one of those three items is not in good shape.

If your organization is new or operating at a loss, be upfront. Insurers are more likely to offer coverage if they see transparency and a plan for stability.

Step 4: Review and Compare Quotes

After your application is submitted, you’ll receive quotes from one or more insurance companies. Here’s what to pay attention to:

• Coverage Limits: How much will the insurer pay out?

• Retention: Similar to a deductible—what do you pay before the insurer steps in?

• Premium: Your annual cost for the policy.

• Exclusions: What’s not covered (this is often the trickiest part).

• Add-ons: Optional coverages like Side A enhancements or broader protection.

It’s important to read the fine print—especially if you’re in a niche or high-risk industry. Sometimes, the riskiest things you do are excluded by default.

For example, if you are a trade association that engages in lobbying with lawmakers, an insurance company may choose to exclude your lobbying activities.

Or if you are an organization that credentials members in your organization, this activity could be excluded if you’re not paying attention.

That’s why having a broker or advisor review the quotes with you is critical. They can catch potential red flags and help you make apples-to-apples comparisons.

Step 5: Bind Your Policy and Get Covered

Once you’ve picked the right policy and insurer, it’s time to bind the policy—that’s the insurance world’s way of saying “make it official.”

To bind coverage, you’ll:

• Sign the required forms

• Pay your first premium

• Receive your policy documents and binder (a summary of coverage)

You’ll now have proof of insurance that you can show to your board, investors, donors, or any other stakeholders. And most importantly, your leadership team will be protected against personal liability for decisions they make on behalf of your organization.

Bonus: Some grants and funding opportunities require proof of D&O insurance—having it already in place can speed up the process.

Final Thoughts: D&O Insurance Is Easier—and More Essential—Than You Think

If you’ve made it this far, you know more about how to buy D&O insurance than most business owners or nonprofit leaders. You’ve also seen why this coverage is a smart investment—even for small and growing organizations.

To recap, here’s how you get covered:

1. Assess your risk and figure out what kind of coverage you need

2. Talk to a specialist who knows your industry and local laws

3. Fill out the application with the right financial and organizational info

4. Compare quotes carefully and ask questions about exclusions

5. Bind the policy, and breathe easier knowing your leaders are protected

   
   

If you're ready to take the next step, reach out to me at Insurance for Entrepreneurs. We specialize in D&O insurance for small businesses and nonprofits, and we’ll walk you through the entire process.

Want more tips on how to protect your organization? Subscribe to our newsletter and follow us on YouTube for practical, jargon-free insurance advice for entrepreneurs and nonprofit leaders.

Let’s protect your mission—and the people behind it.