Directors and Officers Liability Insurance Policy: Choosing the Right Coverage Limit

Author : Go Insure India | Published On : 23 Sep 2026

Ask most boards how their D&O limit was decided, and the honest answer is often “it seemed reasonable at the time. Setting the right coverage limit for a directors and officers liability insurance policy deserves more rigour than that, particularly as a company’s risk profile shifts with growth, funding rounds, or regulatory attention. This article sets aside the usual coverage checklist and focuses squarely on how companies can arrive at a limit that genuinely fits their situation.

Factors Influencing the Directors and Officers Liability Insurance Policy Limit

There is no universal limit suitable for every company. Boards can consider the following factors when assessing their exposure.

1. Company Size and Financial Profile

Revenue, assets, market capitalisation and overall business scale provide a useful starting point. Larger companies may have more stakeholders and greater financial exposure, but size alone should not determine the limit. A smaller company in a highly regulated sector can also face significant D&O exposure.

2. Industry and Regulatory Exposure

Financial services, healthcare, pharmaceuticals, technology and other regulated sectors may face greater regulatory and governance-related risks. Companies should consider the potential cost of responding to investigations as well as defending civil claims. 

Businesses providing professional advice or specialised services should also assess errors and omissions insurance in India separately, as D&O cover is not generally designed to address every liability arising from professional services.

3. Board and Management Structure

The number of directors and officers matters because several insured individuals may be involved in the same claim. Companies should check whether the policy limit is shared among directors, officers and the company and how claims involving multiple insured parties affect the available limit.

4. Listed or Unlisted Status

Listed companies generally face additional shareholder and securities-related exposure. Under Regulation 25(10) of the SEBI LODR Regulations, the top 1,000 listed entities by market capitalisation are required to undertake D&O insurance for their independent directors. The regulation leaves the quantum and risks to be determined by the board.

5. Claims History

Past claims and known circumstances can indicate the types of risks a company may face. A history of shareholder disputes, regulatory proceedings or governance-related allegations may warrant a closer review of the limit.

6. Defence Costs

Legal proceedings can continue for extended periods and involve several directors or officers. If defence expenses erode the policy limit, substantial legal costs can reduce the amount available for settlements or judgments. Companies should therefore understand how defence costs are treated before selecting the limit. 

7. Side A, Side B and Side C

The three principal sides of D&O cover can also affect how much insurance capacity a company needs.

These sides can operate within a shared policy limit, depending on the wording. 

Should Companies Choose a Higher Limit?

A higher limit provides greater insurance capacity but generally increases the premium. The objective should therefore not simply be to purchase the largest available amount.

Companies should assess whether the proposed limit could respond to a serious claim after considering defence costs, multiple insured persons, other claims during the policy period and applicable sub-limits.

They should also check whether specific extensions have lower sub-limits than the overall policy. A large headline limit may provide considerably less protection for a particular exposure if that benefit is separately capped.

Review the Limit at Renewal

The appropriate limit can change as the business evolves. Acquisitions, expansion into new markets, changes in board composition, listing status or increased regulatory exposure can alter the company’s risk profile.

The limit should therefore be reviewed at every renewal alongside exclusions, deductibles, sub-limits and other policy wording. A higher limit does not necessarily provide broader protection if important terms have become more restrictive. For companies providing professional services, changes in client contracts, service offerings or geographic markets may also affect the need for errors and omissions insurance in India, alongside D&O cover.

Conclusion

When selecting a directors and officers liability insurance policy, companies should also consider how their wider liability programme fits together. D&O cover addresses management and governance-related exposures, while separate policies may address professional, operational, or entity-specific risks. Reviewing these covers together can help identify overlaps, gaps and sub-limits before renewal or a major change in business activities