Can the directors' and officers' liability insurance (D&O insurance) play a better role in the financial flexibility and the efficiency of investment? With China 2008-2015 A-listed companies as a sample, we test the relationship in D&O insurance, financial flexibility and corporate investment efficiency. We find that financial flexibility and low-investment are in negative correlation, but financial flexibility is positive with over-investment. D&O insurance has played a positive role in the above relationship. D&O insurance strengthens the relationship between financial flexibility and low investment, and weakens the positive relationship between financial flexibility and over investment. Further study finds that D&O insurance helps to enhance the company's profitability and value. The conclusion of this study not only enriches the theory of financial flexibility, but also deepens the further understanding of the governance of the D&O insurance. This paper provides empirical evidence for the development and promotion of directors' liability insurance in China.