Startups this page is written for

The coverage questions change with what the company builds and sells. This page is written for early-stage companies such as:

software and SaaS companies selling a subscription or a license;
app and platform startups that hold user accounts and payment details;
AI startups building products on top of a model, which our insurance for AI companies page covers in more depth;
tech-enabled service firms that pair software with consulting or implementation work;
hardware and device startups that ship a physical product to buyers.

Established IT support firms and managed service providers will find more detail on insurance for IT and technology companies. Companies still at the idea stage can start with the new-business guide listed below.

Stage one: forming the company and finding a workspace

On the day the company is formed, the risks are modest but real. Founders meet prospects, demo at events and put the product in front of early users. General liability is written for claims that the business injured someone or damaged property belonging to others, and it is often the first certificate a venue, a coworking space or a pilot customer asks to see.

Signing for an office changes the picture. A lease usually names liability limits, asks for the landlord to be added as an additional insured and leaves the tenant to protect its own computers, furniture and build-out. A Business Owner’s Policy packages general liability with property and business income, which can suit a small team with equipment in a leased suite. Send us the lease before you sign and we request quotes against its terms.

Stage two: the first hire

In California, workers’ compensation becomes mandatory with a single employee, and the Department of Industrial Relations counts part-time staff. Have the policy start on or before the first day of work, and describe each role’s duties so the insurer can classify the payroll correctly. The workers’ compensation page explains the coverage, and hiring your first employee puts every step in order.

Early teams also lean on freelance developers and designers. California’s ABC test presumes a worker is an employee unless the business can show all three parts of the test, so a contractor agreement on its own settles little, and the label has to match how the work is really done. The first hire is also the right moment to look at employment practices liability insurance. The Civil Rights Department applies the state’s harassment rules to employers of every size, and claims from applicants and staff over hiring, pay or a termination generally fall outside general liability.

Stage three: raising money and seating a board

Outside investment brings a board, a cap table and people with standing to question how the company is run. Directors and officers insurance answers claims that founders, officers or directors mismanaged the company, misled investors or breached a duty they owed, and its Side A coverage can protect the individuals personally when the company cannot indemnify them. Venture investors commonly expect D&O to be bound by the time a round closes and they take a board seat.

Bring the term sheet, the bylaws and any indemnification agreements to the application, since those documents shape how the policy responds. D&O forms commonly exclude claims arising from professional services, so a software company weighs its D&O and E&O together instead of expecting one to fill in for the other. We request D&O quotes ahead of the closing date, and the insurer sets the limit and terms after reviewing the financials and the board.

Stage four: the first enterprise customer

A large first customer usually sends a master service agreement with an insurance section and a security questionnaire attached. Common requests are technology errors and omissions and cyber at stated limits, general liability naming the customer as an additional insured, and proof of workers’ compensation. Read the limitation of liability clause beside the insurance clause, and see insurance requirements in client contracts for how each request maps to a policy.

Tech E&O is the line built for a customer saying your software or service cost them money. IRMI describes it as reaching technology services, technology products, media content and network security failures, and our professional liability page explains how a claims-made form treats the date of the work and the date of the claim. Cyber insurance handles your own costs after a breach or ransomware attack, plus claims from people whose data was exposed. If the product collects user data from the first beta, cyber belongs on the list from that point.

Benefits for a growing team

Health coverage is often the first benefit a startup team asks about, and it gets harder once people live in different states or countries. A company under 50 full-time staff, with part-timers counted as full-time equivalents, sits below the ACA’s applicable large employer threshold and outside the federal employer mandate, so offering health insurance is its own choice. Our employee benefits for small businesses section explains the options in general terms. On request, we can put you in touch with a benefits partner focused on health cover for remote and international teams, and the partner and the insurer decide eligibility, plans and pricing. Benefit and payroll choices carry tax weight, so check a specific arrangement with a tax professional or local adviser.

The startup guides in that section:

What to have ready for a quote

A startup application moves faster with these at hand:

the stage the company is at and the next milestone, such as a hire, a round or a launch;
what the product does, who buys it and how revenue splits between software and services;
headcount, payroll by role and any freelancers or contractors;
the lease, the investment documents and any customer contracts with insurance sections;
security controls such as multifactor authentication, tested backups and administrator access;
any past claims, disputes or incidents.

With that list, we request quotes for the lines your stage calls for, and the insurer decides terms after reviewing the business. Contact us to start, and come back as each milestone arrives so the coverage keeps pace.

A few useful answers

Common questions

What insurance does a startup need first?

It follows what the company is doing. A founder-only company with no office often starts with general liability, and a team in leased space may fit a Business Owner’s Policy. Workers’ compensation arrives with the first employee in California, D&O with outside investors, and tech E&O and cyber with customer contracts that call for them.

When should a startup buy directors and officers insurance?

Usually before a priced round closes. Investors joining the board commonly expect D&O in place by then, and new directors want to see it before they agree to serve. Starting the application early leaves time to match the limit the investment documents ask for.

Does a startup with one part-time employee need workers' comp in California?

It does. California’s workers’ compensation requirement begins with a single employee, and part-time staff count toward it. Set the policy’s effective date on or before that person’s first day.

Will general liability cover a customer's losses from a software bug?

Usually not. General liability centers on bodily injury and property damage. A customer’s financial loss from a defect, an outage or a failed integration is the claim tech E&O is written for.

Can Mithril1 help with health insurance for our startup team?

On request we can introduce the company to a benefits partner for remote and international team health cover, after which the partner and the insurer decide eligibility, plans and pricing. Your workers’ comp, EPLI, D&O, cyber and other business policies are a separate step: we request quotes, and each insurer decides terms once it has reviewed the company.

Insurance for Startups