When private companies think about risk, they often start with the obvious: property damage, employee injuries, or maybe even cyber breaches. But there’s another category of risk that often surprises private business owners: Directors and Officers (D&O) insurance.
“A big misconception is that D&O is only for public companies,” says Michael Theberge, Professional Lines Producer at Jencap. “I often see private companies that are closely held believe they have no exposure.”
But in today’s litigious business environment, exposure is everywhere, whether you’re a fast-growing startup or a legacy family business. D&O coverage isn’t about wrongdoing. It’s about protection. And increasingly, it’s becoming essential for private companies that want to safeguard their leadership, balance sheet, and long-term viability.
Private Companies Get Sued, Too, Even When They Do Everything Right
Many business owners believe that ethical operations and good intentions are enough to protect them from legal trouble. But Theberge warns that D&O claims don’t require actual wrongdoing, just an allegation. “Companies believe they won’t be sued because they conduct business ethically and feel as though they aren’t doing anything wrong,” he explains. “This isn’t necessarily the case, because D&O covers allegations, whether true or completely false.”
The costs of defending those allegations add up fast. Even small or closely held companies can face lawsuits from:
- Shareholders accusing leadership of misrepresentation or poor disclosure
- Competitors alleging unfair competition or misuse of proprietary information
- Vendors or customers claiming breach of contract or misleading practices
- Employees involved in contentious departures or workplace disputes
In highly innovative sectors like tech or life sciences, Theberge also notes that intellectual property lawsuits are common and costly. And increasingly, cyber incidents are giving rise to D&O claims, particularly when stakeholders allege mismanagement of sensitive data. “Obviously, a company would think about Cyber coverage for an incident, but not necessarily a D&O policy,” Theberge says.
Learn the Hard Way or the Smart Way
Many companies don’t think about D&O coverage until they’re staring down a lawsuit, and by then it’s too late. Michael Theberge recalls one particularly costly dispute involving a startup founder and a lead inventor, whose falling out led to a complex legal battle. “It was a long, complex claim that was expensive to defend,” he says. “Without D&O, the company would have ceased to exist.”
That scenario is far from rare; it’s a reality many companies face when they’re caught unprepared. As we noted earlier, legal challenges can emerge from shareholders, partners, vendors, competitors, or former employees. And even when a company has done nothing wrong, defending against those allegations still drains time, money, and morale.
The best time to seek D&O coverage is before problems arise, and now is the perfect opportunity. “Another misconception is that D&O is too expensive,” says Theberge. “With the market in a soft condition right now, D&O is very reasonably priced.” In other words, the best time to invest in D&O coverage is before you need it, while rates are favorable and options are flexible.
For startups trying to attract board talent or raise capital, a strong D&O insurance policy provides protection and signals maturity. For established companies, it’s a safeguard against the unpredictable. In either case, waiting until the fallout hits means paying more for less peace of mind.
How to Sell D&O Insurance and What to Look For When You Do
Many company leaders still think D&O insurance doesn’t apply to private companies. That’s where agents play a crucial role, by both changing the narrative and making sure the coverage placed actually delivers. Michael Theberge recommends starting with these client-facing talking points:
- Allegations are enough to spark a lawsuit. Even when a company has done nothing wrong, legal defense costs can be devastating.
- Personal assets are on the line. Directors and officers could be held personally liable. D&O helps shield their finances and reputations.
- It signals credibility. For startups seeking investors or board members, D&O is often a prerequisite, not a perk.
“D&O coverage ensures their personal assets aren’t at stake,” says Theberge. “It also protects the company’s balance sheet, which can be just as critical.” But a solid pitch only goes so far without coverage to back it up. That’s why it’s equally important for agents to know which policy features make a difference when a claim hits. According to Theberge, agents should prioritize:
- Additional Side A and Defense Cost limits
- 100% Defense Cost allocation
- Absence of an antitrust exclusion
- Non-voidable policy language
- “For” wording in exclusions (as in: “for actual fraud,” rather than broader “arising out of” phrasing)
When you pair persuasive reasoning with the right policy structure, you’re delivering real protection. That’s what builds trust. And it’s what sets savvy agents apart from the rest.
The Final Word: D&O Insurance Is a Smart Bet for Any Business
Whether it’s a generational family business, a startup securing seed funding, or a growing company navigating competitive pressures, the risks are real, and so is the value of protection. “D&O insurance isn’t just about protecting the leadership team,” Theberge says. “It’s about protecting the balance sheet of the company itself.” And right now, the cost to secure that protection is lower than many private businesses expect.
Jencap’s Professional Lines experts work with agents to place D&O coverage that fits each client’s unique risk profile, ensuring companies are protected today and resilient tomorrow. Reach out to our team today to learn more.
