Insurance is the part of the business most operators ignore until they're in a situation where they wish they hadn't. Insurance isn't about expecting to collect, it's about ensuring that one bad event doesn't end the company. A few standard policies prevent nearly all catastrophic outcomes. Get them in place early; adjust limits as the company grows.
Covers bodily injury and property damage claims. Customer slips in your office. Visitor gets injured. Someone sues claiming your booth at a conference damaged their equipment. Usually $1M per occurrence / $2M aggregate is the starting point.
Critical for anyone who provides a service, software, or advice. Covers claims that your product or service failed to perform, caused financial loss, or had errors. A customer claims your software caused them to lose money. E&O covers the defense and potential settlement. $1M–$5M depending on customer profile.
Covers costs of a data breach: forensics, customer notification, credit monitoring, regulatory fines, business interruption, ransomware recovery. If you store any customer data, this is non-optional. $1M–$10M+ depending on data volume and sensitivity. Be very careful about exclusions, many policies exclude social engineering or nation-state attacks.
Protects directors and officers personally from claims by shareholders, employees, or regulators. Required before raising institutional capital. Becomes more important as the board grows. Without D&O, you cannot recruit experienced board members.
Covers employment-related claims: wrongful termination, discrimination, harassment, wage/hour disputes. Claims frequency is higher than most operators expect, across a company's life, statistically one of these claims is almost guaranteed. Critical once you're over ~25 employees.
Mandatory in most states. Covers injuries that happen during work. Usually cheap; administrated through payroll.
If you offer benefits, the administrator role creates fiduciary exposure. Fiduciary liability insurance protects against claims of mismanagement.
Covers lost revenue if operations are interrupted by a covered event (fire, natural disaster). Included in most property policies.
If you own real estate or have material office equipment. Becomes less relevant in remote-first companies.
Covers the company if a critical founder or executive dies or becomes disabled. Usually purchased when the company has institutional investors who demand it.
Don't buy insurance direct from carriers. A good commercial insurance broker:
Interview 2–3 brokers. Pick one who specializes in your industry + stage. Broker commissions are paid by carriers; you don't pay the broker directly.
If something happens:
Insurance needs change as the business changes. Every year, review:
Related: Risk management basics · Data + IP protection · Cash flow forecasting