Management liability insurance can be relevant for startups, even before a full board is in place. It is a type of business insurance designed to respond to certain claims made against a company and its managers about how the business is run.

Not always, but it is commonly requested once a startup has external investors, a board, or plans to scale. D&O is designed to respond to claims alleging wrongful acts in managing the company, subject to the policy terms.

It is often recommended to consider business insurance before you need it urgently, because the trigger is usually a contract, a hire, or a change in risk. Common times startups arrange insurance include before signing larger customer contracts, before raising capital, and before hiring employees. It is also common to consider cover before you start handling meaningful customer data, or before launching a physical product.

Venture backed startups often see insurance needs come up earlier than other businesses, mainly because of investor expectations and enterprise contract requirements. Directors and officers insurance is often requested around or after a funding round, especially if the company is adding a board or independent directors. Professional indemnity, sometimes described as errors and omissions, is also commonly required in customer contracts, particularly for SaaS and technology services. Cyber insurance is often expected if you store customer data, process sensitive information, or connect into client systems. Employment practices liability becomes more relevant as headcount grows and hiring increases, because the risk of employment related claims generally rises with the size of the team. Example: After raising a Seed or Series A round, investors may ask the company to put directors and officers insurance in place as part of improving governance and meeting common board expectations.