Startup insurance UK: the complete guide for founders

How to use this guide

Founders usually meet insurance in one of three ways: a customer’s contract demands it, an investor’s term sheet mentions it, or somebody hires the first employee and discovers there is a legal obligation. Almost nobody arrives at it from a considered assessment of risk, which is why so many early-stage programmes end up as a bundle of policies bought reactively and never revisited.

This page is the top of the startup cluster. It sets out the one cover UK law actually requires, the covers that get asked for and by whom, and then routes you three ways: by funding stage, by what kind of company you are, and by the specific moment you are in — usually a round or a contract. It deliberately does not repeat the stage-by-stage detail; that lives on startup insurance by funding stage and on the individual stage pages behind it.

The one cover UK law requires

Employers’ liability insurance is a legal duty. Under the Employers’ Liability (Compulsory Insurance) Act 1969, a company employing staff in Great Britain must hold employers’ liability cover of at least £5 million with an authorised insurer, and there are penalties for not doing so. The duty starts with your first employee, not at some headcount threshold, and it is worth knowing that a company employing only its own directors who each own a large enough share of the business may be exempt — which is exactly the position many pre-seed companies are in right up until the day it stops being true.

That transition is the single most commonly missed moment in early-stage insurance. See employers’ liability insurance for what the duty actually involves.

Everything else is driven by contracts and investors

No other business insurance is legally mandatory for a typical UK startup. What makes the rest of the programme necessary is commercial: someone you want to do business with requires it, or you have an exposure you could not absorb.

Directors’ and officers’ liability (D&O) protects individual directors personally for claims arising from their management decisions, and it is the cover investors care about most. It is important to be precise here: D&O is not legally required in the UK. It becomes effectively unavoidable because investors expect it, because a term sheet or shareholders’ agreement obliges the company to maintain it, and because a good non-executive will not join an unprotected board. That is a contractual and practical requirement, not a statutory one. See D&O insurance for tech companies.

Professional indemnity, tech E&O and product liability for software. If you sell software, integrations, data or advice, this is the cover that responds when a customer says your product failed and cost them money. Enterprise procurement asks for it by name and by limit. See technology errors and omissions insurance.

Cyber. Increasingly requested in the same breath as PI by customers, and separately necessary because a small team holding customer data has real first-party exposure. See cyber insurance for startups.

Public liability. Not compulsory, but required by most landlords, co-working operators, event organisers and anyone letting you on their site. See public liability insurance.

Contents, equipment and business interruption. Modest sums, easily overlooked, and the practical answer to a laptop fleet and a lease deposit.

Route one: by funding stage

What you buy changes less with the round label than with the events that tend to happen around it. Our startup insurance by funding stage page is the router: it explains which triggers add which layer, and links through to the detailed pre-seed, seed, Series A, Series B and growth-stage pages. If you prefer to see it as an interactive map, our startup and scale-up roadmap presents the same journey visually.

Route two: by what kind of company you are

Sector changes the shape of the programme more than headcount does. An AI startup carries model behaviour and output exposure that a standard tech wording may address badly or exclude outright. A fintech has regulatory permissions, client money questions and financial-loss exposures that sit awkwardly across PI and crime cover. A SaaS company is judged on uptime commitments, data handling and the liability caps in its own terms. An agency that builds and runs software takes on delivery risk for other people’s systems. And a company that runs infrastructure for clients faces aggregation — one failure, many claimants — which is a limits question before it is a price question (IT and technology business insurance).

Route three: by the moment you are in

If you are raising, work backwards from the completion date: diligence will ask what you hold, and putting D&O in place after signing is harder and slower than putting it in place before. Our insurance checklist before a funding round is built for that.

If you are closing a first enterprise contract, read the insurance clause before you sign it rather than after. It usually specifies covers, limits, and sometimes a requirement that cover be maintained for a period after the contract ends — which is a real, ongoing cost commitment. If you are growing past the arrangements you started with, as your firm grows covers the transition.

What founders most often get wrong

Buying on price at the point of first need. The cheapest policy that satisfies a procurement checkbox often has a limit, a territory or an exclusion that fails the next contract.

Ignoring retroactive dates and continuity. Claims-made covers such as PI, cyber and D&O only respond to claims made while the policy is live, and usually only for work done after a retroactive date. Switching insurer carelessly, or letting cover lapse for a month, can quietly delete years of past exposure. Continuity is worth more than a small saving.

Assuming US customers are just more of the same. Territory and jurisdiction wording decides whether a claim brought in the United States is covered at all. It is a question to ask before the first US contract, not after.

Not telling the broker things have changed. A pivot, a new product line, a first employee, a new office, a first overseas entity — each of these changes the risk. Insurance bought against last year’s company is the most common reason a startup claim goes wrong.

How Apex works with founders

We start with the contracts and the cap table rather than a proposal form: what you have promised customers, what investors have asked for, who you employ, and what would actually hurt if it went wrong. From there we build a programme that can grow without being torn up each year, and we read the wordings so that the PI, the cyber and the contractual promises sit together coherently. Bristol-based and FCA-regulated, and comfortable explaining the same thing twice to a board that has never bought insurance before.

Frequently asked questions

What insurance is a UK startup legally required to have?

Employers’ liability insurance, once you employ anyone. The Employers’ Liability (Compulsory Insurance) Act 1969 requires at least £5 million of cover with an authorised insurer, and penalties apply for not holding it. A company whose only staff are directors with a large enough shareholding may be exempt, which is why the first non-director hire is such an important moment. No other business cover is compulsory.

Is D&O insurance mandatory for startups?

No. Directors’ and officers’ cover is not a legal requirement in the UK. It becomes effectively unavoidable for a different reason: investors expect it, term sheets and shareholders’ agreements often oblige the company to maintain it, and experienced non-executive directors are reluctant to join a board without it. Treat it as an investor and contractual requirement, not a statutory one.

When should a startup buy professional indemnity or tech E&O?

Usually when the first customer contract requires it, and in practice that is often the moment you are asked to sign an enterprise agreement. Because these covers are claims-made, buying earlier and maintaining continuity matters more than the initial limit: cover has to be live when a claim is made, and the retroactive date determines how far back your past work is protected.

Do we need cover before we have any revenue?

It depends what you are exposed to rather than what you are earning. A pre-revenue company with employees needs employers’ liability by law. A pre-revenue company with a signed pilot customer, a co-working licence or an investor director on the board typically needs the covers those relationships require. A pre-revenue company with none of those may genuinely need very little.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.