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Opening a data room soon? We help founders get their insurance in order before diligence starts, so a gap never becomes a condition to closing.
Get a tailored quote →Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-06
When you take on institutional money, the investor is buying into a business and its risks. Insurance is one of the ways those risks are transferred away from the balance sheet, so their advisers look at it. Diligence is usually run by the investor's lawyers, sometimes supported by their own insurance or risk advisers, and it feeds into the disclosure schedule and the warranties you give in the investment agreement.
The review is rarely dramatic. Someone works through a checklist: which policies exist, what they cover, what the limits are, when they renew, whether premiums are paid, and whether anything has been claimed or is likely to be. They also cross-check your commercial contracts — customer agreements, leases, supplier terms — against your policies to see whether you are actually carrying the cover you have promised other people you hold. Where the picture is incomplete, they ask questions, and every question is time and legal cost on both sides.
The exact scope scales with the size of the round and the sector, but the core enquiries are consistent. Expect diligence to look at:
This is where founders often get the wrong end of the stick. Directors' and Officers' (D&O) insurance is not a legal or statutory requirement in the UK. What tends to happen is that investors require it — frequently as a condition in the term sheet or investment agreement, and commonly from Series A onwards. The logic is straightforward: once professional investors put a nominated director on your board, they want that individual, and the founders, protected against personal liability claims arising from board decisions.
So if D&O appears on a diligence checklist, it is almost always because the investor expects it as a condition of investing, not because the law demands it. If you do not yet have a policy, that is fine — but it is far better to arrange it in an orderly way than to scramble to bind cover in the final days before completion, which is exactly when terms and pricing are least in your favour. We explain the mechanics in our guide to directors' and officers' insurance.
Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.
It is worth separating what the law mandates from what investors prefer. The clearest statutory obligation is Employers' Liability insurance. Under the Employers' Liability (Compulsory Insurance) Act 1969, once you employ staff you must hold this cover, subject to a few narrow exceptions (for example, certain family-run arrangements or businesses with no employees). Trading without it when you should have it exposes the company to penalties, and diligence teams check for it early because its absence is a bright-line failure rather than a matter of judgement.
Beyond that, most business insurance is contractual or commercial rather than legal — you carry it because a customer contract requires it, because your landlord requires it, or because it is simply prudent for a company at your stage. The distinction matters in diligence: a missing statutory policy is a hard problem, while a missing prudent-but-optional policy is usually resolved with a warranty, a disclosure, or a commitment to put cover in place.
Gaps rarely collapse a deal outright, but they add friction at the worst possible moment. A few common ways they bite:
None of this is fatal, and experienced investors have seen it all before. But every avoidable question slows the round and shifts a little leverage away from you. The founders who sail through are the ones whose insurance file answers the questions before they are asked.
The good news is that insurance is one of the more controllable parts of diligence. You cannot rewrite your claims history, but you can make sure everything is documented, current and consistent. Before you open the data room, work through the following:
Doing this a few weeks ahead, not the night before, is the whole game. It turns insurance from a source of diligence queries into a section the investor ticks off quickly. If you are still mapping which policies your stage and sector call for, our overview of insurance for startups and scale-ups is a useful starting point, and it is worth reading alongside the specifics of professional indemnity cover if you sell services or software.
In the investment agreement you will typically give warranties about your insurance — broadly, that valid policies are in force, premiums are paid, and nothing has happened that would let an insurer avoid a claim. Anything that is not quite right gets set out in the disclosure letter, which qualifies those warranties and protects you from later comeback. This is why an accurate, tidy insurance file matters so much: you can only disclose what you know, and an incomplete picture is where post-completion disputes start.
Some diligence now reaches into newer areas — how AI is used in the product, whether cyber cover responds to your specific exposures, or whether a transaction warranty and indemnity (W&I) policy is being considered on larger rounds. These are genuinely evolving, and both policy wordings and market appetite shift. Treat blanket claims about them with caution and take specialist advice on your exact situation rather than relying on general rules of thumb. Your lawyers will handle the legal drafting; your broker should make sure the underlying cover behind those warranties genuinely does what the paperwork assumes.
We sit alongside founders through the whole round — reviewing contracts for insurance obligations, closing gaps, and getting D&O in place before it becomes a condition to closing.
Get a tailored quote →Diligence is one of the moments where having a broker who knows your business pays off. We can produce a clean summary of your programme for the data room, cross-check your contracts against your cover, flag gaps before an investor's lawyer does, and move quickly if a term sheet requires cover you do not yet hold. The aim is simple: keep insurance off the critical path so you can spend the round negotiating valuation, not chasing certificates. If you are heading into a raise and want your programme diligence-ready, speak to an Apex specialist before you open the data room.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This article is general information, not advice on a specific policy or a recommendation to buy any product.
