Startup insurance at pre-seed: what you actually need

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-06

You are pre-seed. Maybe it is just you and a co-founder, a laptop each, a bit of angel money or your own savings, and a product that is closer to a prototype than a business. Insurance probably feels like a problem for later — something you will sort out when there is a proper company to protect. For the most part, that instinct is right. But there is a small, specific set of things that genuinely matter from day one, and one of them is a legal duty the moment you take on your first person. This guide walks through what to buy now, what to skip, and how to avoid the two classic mistakes: being uninsured on the obligations that count, and over-buying cover you do not need yet.

Do I even need insurance at pre-seed?

Honestly, less than most people try to sell you. At the earliest stage your risk profile is small: few or no employees, limited revenue, few contractual commitments, and not much for anyone to sue over. That is exactly why over-buying is a real trap — a founder burning runway on a stack of policies designed for a fifty-person company is wasting money that should be going into building the product.

But "less" is not "none." The dividing line is simple. Some cover is genuinely optional at this stage and can wait until a customer, an investor, or a contract asks for it. One type — employers' liability — stops being optional the moment you employ someone, because it is required by law. The skill at pre-seed is telling those two categories apart, and that is what the rest of this guide does.

Employers' liability: the one that is a legal duty

If you employ staff in the UK, you are almost always legally required to hold employers' liability (EL) insurance under the Employers' Liability (Compulsory Insurance) Act 1969. This cover exists to pay compensation if an employee is injured or becomes ill because of the work they do for you. It is not a nice-to-have or an investor preference — it is a statutory obligation, and operating without it when you should have it can expose you to penalties.

The trigger is employment, not headcount or revenue. A single part-time hire can bring you within scope. There are narrow exceptions — for example, some businesses that employ only close family members, or genuine situations where a company has no employees at all — but these are limited and easy to misjudge, so it is worth checking your exact position rather than assuming you fall outside the rules.

A few practical points founders often get wrong:

• The status matters. Genuine self-employed contractors may sit outside EL, but people you treat like employees usually count — and the label on the contract does not decide it.
• It applies from the first employee, not once you cross some size threshold.
• It is separate from public and professional cover; do not assume one policy quietly includes it.

If you are still just founders with no employees, you may not need EL yet. But the day your first offer letter goes out, put it on the checklist — it is the one thing at this stage you cannot simply defer.

Larger or more complex risk? Speak directly to a director — call 0117 325 0027 or email info@apexinsurancebrokers.co.uk.

What about public liability?

Public liability (PL) covers you if your business activities cause injury to a member of the public or damage to their property — a client trips over your kit at a meeting, or you damage something while working at their site. It is not legally required, but it becomes worth having as soon as your work brings you into physical contact with people or places beyond your own desk.

At pre-seed this is often a "depends on how you operate" call. If you and your co-founder work from home, never host clients, and never visit anyone's premises, your exposure is genuinely low. If you take meetings at a co-working space, exhibit at demo days, visit customer offices, or handle anyone else's equipment, PL starts to earn its place. Some landlords, co-working operators and event organisers will also ask you to hold it as a condition of using their space, which can make the decision for you.

Limits are usually offered in illustrative bands such as £1m, £2m or £5m of indemnity. The right level depends on your activities and anything a contract specifically demands — not on a fixed rule — so it is worth matching the limit to how you actually work rather than defaulting to the biggest number.

Do I need professional indemnity yet?

Professional indemnity (PI) protects you if a client suffers a financial loss because of advice you gave, work you delivered, or a mistake in your service. If your pre-seed startup is doing anything client-facing — consulting, agency work, building software to a specification, designing, advising — PI is often the most relevant cover you can hold, because your biggest early exposure is usually a dissatisfied client rather than a physical accident.

Two things commonly push PI up the priority list at this stage:

• Contracts demand it. A first serious client contract will frequently require you to carry PI at a stated limit before they will sign. Discovering that clause the week you are meant to start is a familiar and avoidable scramble.
• You are advising or building for others. The more your revenue depends on your judgement or your code being right, the more a single alleged error could cost you — and PI is designed for exactly that scenario.

If you are purely building your own product with no external clients, PI may be premature and you can revisit it as your model firms up. If clients are already in the picture, it usually belongs on your pre-seed list. For more on how this fits together with client work, our guide to professional indemnity insurance for startups goes deeper.

Cyber and product thinking for tech startups

If you are a technology business, your most valuable and most vulnerable assets are digital: your code, your systems, and any data you hold about users or customers. Cyber insurance is built for that world — it can respond to incidents such as data breaches, ransomware and business interruption from an attack, and it typically brings access to specialist incident-response help when something goes wrong, which a two-person team is unlikely to have in-house.

At pre-seed, cyber is rarely a strict obligation, but it climbs the list quickly the moment you start handling personal data or holding anything a customer would be alarmed to lose. If you are processing user data, integrating with client systems, or storing sensitive information, it is worth a proper look rather than a reflexive "later."

Alongside cyber, it is worth thinking early about the shape of your product and how liability might attach to it as you grow — particularly if you are building something that customers will rely on operationally. You do not need a heavy programme now, but understanding where your exposure will sit as you scale helps you avoid surprises later and buy in the right order. Areas like AI-driven products are still evolving fast, and the way cover responds to them varies between insurers, so this is a good conversation to have with a specialist rather than a box to tick off a template.

What can safely wait? (Including D&O)

Plenty. The heavier, more expensive programmes that founders sometimes feel they "ought" to have usually belong to a later stage, once there is more to protect and someone specifically asking for it.

The clearest example is directors' and officers' (D&O) insurance, which protects directors personally against claims relating to how they run the company. D&O is not a legal requirement. What tends to happen is that investors require it — it is a common condition in term sheets, frequently appearing from around Series A, when institutional money comes in and the board wants its directors protected. At pre-seed, with no such investors at the table, buying D&O early is usually spending you do not need to make yet. When a term sheet does raise it, that is the moment to act, and our explainer on directors' and officers' insurance explained covers what to expect.

Other cover — broader management liability, more comprehensive commercial packages, key-person arrangements — generally scales with the business too. The healthy pattern is to add cover as real triggers appear: a hire, a client contract, a lease, an investor requirement, a new data responsibility. Buying ahead of those triggers is how early-stage companies quietly waste money they cannot spare. If you want to see how the picture changes as you raise, the seed-stage insurance guide picks up where this one leaves off.

A realistic pre-seed checklist

Pulling it together, here is how most pre-seed founders should think about it, in rough order of priority:

• Employing anyone? Employers' liability is a legal duty — sort it before the first hire starts.
• Meeting clients or using premises? Consider public liability, and check whether a landlord or venue requires it.
• Advising or building for clients? Professional indemnity is often the key cover — and a contract may insist on it.
• Handling data or building tech? Look seriously at cyber, especially once personal data is involved.
• No investors yet? D&O and the heavier programmes can wait — revisit when a term sheet raises them.

The through-line is proportion. Cover the legal duty, cover the exposures your actual activities create, and leave the rest until a genuine trigger arrives. There are no fixed prices here because there should not be — what you pay depends on your activities, headcount, the data you hold, the limits you choose and the specifics of your business, which is precisely why a tailored conversation beats a one-size-fits-all package.

If you would rather talk it through than guess, speak to an Apex specialist and we will map your cover to where you actually are, not where a template assumes you should be.

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.