Insurance is one of those topics that founders and finance leaders tend to delay.

It feels boring. It feels expensive.

And until something goes wrong, it doesn’t feel urgent.

But once you start hiring people, signing contracts, or handling customer data, insurance stops being optional risk management and becomes part of running a professional business.

What most founders struggle with is not whether they need insurance, but which policies actually matter and when.

This article is not about selling insurance. It’s about understanding what each policy covers so you can make sensible decisions. And if there’s two pieces of advice I would strongly recommend: 1. speak to a good insurance broker. They see claims every day and can guide you far better than a comparison website.  2. Insurance should always be your Plan B (or even Plan C) for mitigating business risks.  Don't make insurance your Plan A.

The Core Types of Startup Insurance

Below are the main insurance policies most startups encounter.

Some are legally required, others are commercially expected, and some are simply good risk management as your business grows.

1. Employers’ Liability Insurance

Status: Essential (and legally required in many countries, including the UK)

If your company employs people, this is one of the first policies you need.

Employers’ liability insurance covers claims from employees who become ill or injured because of their work. This includes legal defence costs and compensation.

When it becomes essential

• As soon as you hire your first employee  
• If you hire contractors who may legally count as employees  
• If you have interns or work experience staff

Legal requirements

• UK: Legally required for most businesses with employees, with minimum cover of £5m.  
• USA: Workers’ compensation is required in most states.  
• Continental Europe: Requirements vary by country but employee protection insurance is typically mandatory.  
• Australia: Workers compensation insurance is mandatory for employees.  

In other words, once you have staff, you almost certainly need this.

2. Public Liability Insurance

Status: Important for most startups

Public liability insurance protects your company if a third party is injured or their property is damaged because of your business activities.

For example:

• Someone trips in your office  
• You damage a client’s property during a meeting  
• Equipment causes an accident at an event

When Public liability insurance becomes important

• If clients visit your office
• If your team visits customer sites
• If you attend trade shows or events
• If you sell physical products

It’s rarely a legal requirement, but many landlords, enterprise customers and event organisers require it in contracts.  I've been often asked to provide a certificate of this policy and the next one to the marketing team, so that they can book an event.

3. Professional Indemnity (PI) Insurance

Status: Essential for advisory or service businesses

Professional indemnity insurance covers claims that your advice, services, or work caused financial loss to a client.

For example:

• Incorrect financial advice
• Software errors that cause client losses
• Strategic advice that leads to commercial damage

When PI Insurance becomes essential

• Consulting firms
• Accountants, lawyers and advisors
• Agencies and freelancers
• SaaS platforms making recommendations or calculations

Many professional bodies also require it.

4. Cyber Insurance

Status: Increasingly important for tech companies

Cyber insurance covers losses resulting from cyber incidents such as:

• Data breaches
• Ransomware attacks
• System outages
• Data theft

It may also cover legal costs, regulatory fines, and customer notification costs.

When Cyber insurance becomes important

• SaaS businesses
• Companies storing customer data
• FinTech or data-heavy startups
• Any business relying heavily on digital infrastructure

With cyber incidents increasing globally, this policy is becoming far more common.  It is an expensive one and it should most definitely be your Plan B.  With your Plan A being Data Security, etc.

5. Directors and Officers (D&O) Insurance

Status: Important for funded startups

D&O insurance protects company directors and executives from claims related to management decisions.

Typical scenarios include claims from:

• Investors
• Regulators
• Employees
• Shareholders

This is particularly relevant once you raise investment.

When D&O insurance becomes important

• After raising venture capital
• When forming a board
• When issuing equity to employees

Investors often expect this to be in place.  If you have a look at the Shareholder's Agreement, you may find that it is one of the key requirements, so make sure you have this minimum requirement in place.

6. Product Liability Insurance

Status: Essential for companies selling physical products

Product liability insurance protects your company if a product you sell causes injury or damage.

For example:

• Faulty electronics causing injury
• A defective component damaging another product
• A consumer product causing harm

If you manufacture, import, or distribute products, this can become critical.

7. Property and Equipment Insurance

Status: Important once you have assets

This covers physical assets such as:

• Computers
• Equipment
• Office furniture
• Stock and inventory

If your office floods, burns down, or gets robbed, this is what replaces those assets.

When Property & Equipment insurance becomes important

• Offices with significant equipment
• Hardware startups
• Retail or inventory-based businesses

8. Business Interruption Insurance

Status: Nice to have but valuable for certain businesses

This covers loss of income if your business cannot operate due to an unexpected event such as fire or flooding.

It’s more common for:

• Physical retail businesses
• Manufacturing companies
• Businesses dependent on premises

9. Management Liability / Employment Practices Insurance

Status: Increasingly common

This type of cover protects against claims from employees relating to:

• Unfair dismissal
• Discrimination
• Workplace harassment

As companies grow, employment disputes become more common, so this insurance is becoming more popular.

When Startups Usually Add These Policies

A simple way to think about it:

Very Early Stage

• Professional indemnity (if services)
• Public liability

Hiring First Employees

• Employers’ liability (mandatory in many countries)

Handling Customer Data

• Cyber insurance

Raising Investment

• Directors & Officers insurance

Selling Products

• Product liability

Why a Broker Is Worth It

The insurance landscape is complex. Policies overlap, exclusions matter, and startups often underestimate their risks.

A good broker can:

• Identify what cover you actually need
• Avoid duplicate policies
• Ensure you meet contractual requirements
• Help if a claim happens

They also understand the differences between UK, US, European, other country insurance expectations, which is important if your startup operates internationally.

Insurance should not be an afterthought once something goes wrong.

For startups and scaleups, it’s about protecting the business from the handful of events that could genuinely destroy it.

Most companies don’t need every policy immediately. But understanding what each type of cover does will help you introduce them at the right stage.

And if you’re unsure, speak to a broker before guessing.

It’s one of those areas where a small amount of guidance can prevent a very expensive mistake.

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