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What Insurance do Start-Ups Need?

Benefits you’ll enjoy when you have the right coverage

Aside from meeting certain legal and compliance requirements, here are a couple important benefits start-ups enjoy when they have the right insurance coverage:

Attract Investors

Investors do everything in their power to eliminate risk from the equation. One of the ways they do this is by requiring companies to get certain types of insurance coverage.

Keep Customers Happy

Many of your customers will demand you have proof of insurance, particularly if you’re in the B2B space.

Hire Top Talent

As you grow, so does your risk exposure. Having right coverage in place will ensure you can hire the best talent to help you scale your business.


As you grow so does your risk exposure. Having right coverage in place will give you peace of mind and time to focus on scaling your business.


When you’re taking on entire industries and shaking up the status quo, something’s bound to go wrong. Someone’s probably going to sue you at some point. Whether the danger is coming from competitors or regulators, you’ll have a black hole of time-wasting paperwork and legal fees on your plate if you don’t have the right insurance in place.

What Insurance do you need for your start-up?

Errors & Omissions

Provides Coverage For:

  • Professional Services – coverage for negligent acts or errors or omissions related to your services, or failure to deliver a product as promised
  • Tech Products – coverage for product failure (i.e. it didn’t work as intended) Media and Advertising
  • Media services resulting from your client getting sued for defamation, libel, or slander

Example One:

A predictive software to help customers make better financial decisions. Found to have lack of functionality and negligent predictive recommendations that led to poor decisions and bankruptcy. They were sued, but the E&O policy covered $1.08 Million in legal costs and $3.8 Million and $3.8 million in damage costs.

Example Two:

An e-commerce website built by a digital agency to showcase and sell valuable collectibles. Customers bought and paid for items and it didn’t work due to negligent coding and functionality. Their E&O policy covered $558,000 in legal fees and $180,000 in damages.

Note: You need Errors and Omissions insurance if you provide a service, offer advice, or sell tech products.

Directors & Officers Liability

Provides Coverage For:

  • Breach of legal or fiduciary duties
  • Decisions that result in adverse financial consequences for shareholders
  • Allegations of misrepresentation and negligent acts
  • Misleading statements, reporting issues, or inaccurate disclosure
  • Failure to adhere to provincial and federal laws and regulations

Example One:

An investor sued a company’s chairman and director, asserting that he was misled regarding how his investment would be used. Allegedly he was told that his $525,000 investment would be used for capital improvements, but his investment was instead used to pay operational expenses and existing debt. The investor sought recession and damages upon the alleged misrepresentations. The case was resolved after mediation for $285,000 on behalf of the insured. Approximately $265,500 was paid in defending the claim.

Example Two:

A company recruited a top sales executive who had an employment contract with a competitor company. The competitor sued the company for damages suffered as a result of losing its top sales producer on the grounds that the company interfered with the competitor’s contractual relationship with its employee. Defense expenses were in excess of $250,000 and the competitor was awarded damages of $600,000.

Note: Any business with a corporate board or advisory committee, including non-profit organizations have an exposure. If you’re looking to secure venture capital, you will most likely need to have D&O coverage in place, as a form of protection for the investors

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