Insurance for Venture-Backed Startups

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According to a recent survey, one of every four private companies in the United States experienced a Directors & Officers (D&O) liability loss during a three-year period. This threat is especially relevant to early-stage (Seed to Series C) startups, who have specific needs that often are not addressed by the existing products in the market. Startups have a difficult time procuring insurance coverage due to a limited financial history. As a result, they are often presented with limited business insurance options, as well as expensive premiums and minimal limits.

CoverWallet offers a customized bundle with the right coverage for a startup’s executive teams that meets the coverage needs of modern-day technology startups. We take a data-driven pricing approach to be able to offer highly competitive pricing, and our team of startup insurance experts are available to walk you through the process and different coverage options

By providing protection against specific types of liability that other policies don’t address, executive liability insurance can save your business the expense of costly litigation and claim settlements, as well as help protect your company’s hard-earned reputation.

Management Liability Insurance

What is covered by Management Liability?

From injury claims to property hazards and professional perils, the long list of unplanned situations and circumstances makes every business exposed to certain risks and liabilities. An insurance policy specifically designed to cover management liability picks up when General Liability policies leave off, protecting businesses and key officers against claims along with associated expenditures. The Management Liability Startup Package is a combination of three different types of insurance: Directors and Officers Insurance, Employment Practices Liability Insurance, and Fiduciary. Management Liability is a combination of three different types of insurance:

Directors and Officers (D&O)

Insurance to protect D&O of non-profit, for-profit, and privately held businesses for liability that might arise while managing the business. Some of the risks covered include negligent acts, failure to comply with regulations, omissions or misleading statements, and other related risks.

Fiduciary Liability Insurance

This insurance protects businesses against fiduciary related claims due to mismanagement of employee benefit plans. The amount of risk associated with fiduciary roles is heightened by potential lawsuits filed against a fiduciary or trustee without complete evidence of wrongdoing.

Employment Practice Liability

EPLI provides protection for the company, the directors, officers, and, employees for claims made pertaining to wrongful acts and issues arising from employment practices. Most common claims covered include sexual harassment, discrimination, wrongful termination, and retaliation.

Advantages of CoverWallet’s Startup Insurance Package for VC-backed companies

  • Save Money and Time

    Startups are often denied coverage or face high premiums from carriers who have a hard time classifying their business into traditional categories and working with the unique financial characteristics of high growth companies. We understand startups and we understand insurance. Our approach to Management Liability is different from other companies, and we can help save you time and money, while getting you the best possible coverage.

  • Proprietary algorithm

    CoverWallet’s insurance package for venture-backed startups leverages a proprietary algorithm that ranks institutional investors that typically back startups into tiers based on their track records and due diligence processes. For example, if you are backed by Index Ventures, Andreessen Horowitz, or another firm, our algorithm looks at their history to help evaluate your risk. The reason for this is that VCs typically do a lot of risk assessment in their due diligence process, which means that we don’t need to ask you all the same questions to understand your business’s unique exposure.

  • Admitted Insurance

    Additionally, while some companies offer startup insurance that is non-admitted, our insurance product is fully admitted. An admitted product is one that has been approved by a state’s insurance regulators, which should provide you more peace of mind that you are getting the right coverage.

Detailed product comparison to closest competing products



Management Liability* CoverWallet Competitors
Admitted Market Yes Sometimes
Aggregate Limits $5 million $3-5 million
Directors & Officers Coverage(Past, Present, Future) Yes Yes
VC-Based Qualifier Yes Sometimes
Wage & Hour Yes Yes
Failure to Promote Yes Yes
Fiduciary Coverage Yes ($5 million Limit) Sometimes ($3 million Limit)



The information contained in above and this document is based solely upon review of publicly available sources and those forms filed in SERFF as of 3.4.2020. The forms and coverages provided by competitors are subject to change.

Additional benefits:

  • Rating Factor

    VC based rating factor to account for the most recent lead investor. We leverage the research, due diligence, and resources provided by the policyholder’s most important investors to better understand their exposure.

  • Broad Subsidiary language

    In the event of a claim, a startup may have its own choice of counsel and feel most comfortable with the opportunity to involve someone they trust. This policy allows for that.

  • Employee Stock Ownership Plans

    Employee Stock Ownership Plans (ESOPs) are key to the Startup’s founders and employees. Founders rely on them to attract talent and motivate employees. However, due to their personal nature, these plans can create unexpected exposure for companies. The Fiduciary coverage in this product covers ESOP programs and benefit plans up to the full Fiduciary Limit, adding insurance security to a key tool for acquiring talent.

  • Lowest Retention amounts

    As a result of the underwriting approach, the CoverWallet Management Liability program offers one of the lowest Retention amounts available in the California marketplace (the epicenter of startup activity), at a minimum of $10,000. Most carriers are providing a minimum $25,000 retention or higher in California.

  • Wage & Hour coverage

    Through the Wage & Hour coverage (Defense Costs Only) this product provides startups with the protection needed for the Fair Labor Standards Act exposures. These claims tend to be high hazard and extremely expensive.

  • Third-Party Coverage

    Startups are lean and interact with many outside individuals and vendors every day. This increases the potential exposure and risk associated with a third-party’s interaction with the startup’s employees and locations. The EPL coverage provides cover for any Third-Party EPL up to the limit in the event an outside party sues for perceived harassment or discrimination. This will also cover claims from candidates seeking employment, which is crucial to a startup that is quickly growing its headcount.

  • In line with Evolving organizational structures

    Startups typically have an evolving organizational structure and corporate protocols, which means that some issues may not get escalated immediately or handled and unnecessary risk is created. This product limits the knowledge of potential claims to Senior Management only as the Control Group, meaning coverage for claims may be available unless Senior Management was aware at the time the policy was put into effect.

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Why do I need Management Liability?

Losses related to the actions of directors and officers are more common than many realize. A single loss could be devastating to a growing business. Without proper protection, including directors indemnity insurance, businesses face sizable exposure that can affect cash reserves, working capital, or even personal assets.

In most cases, businesses face D&O related lawsuits from customers. But vendors, government agencies, regulators, partners, and shareholders can also file legal claims against your company. Costly litigations, lengthy court process, legal defense costs, and damage to your business reputation all wear on a business, causing a decrease in productivity and a decrease in morale. Without the coverage provided by directors and officers liability insurance, even a simple allegation, regardless if it’s true or not, can be costly, and time-consuming, and an unproductive distraction from the needs of the business.



Disclaimer: COVID-19 has resulted in restrictions to the insurance program and not all coverage above may be currently available.

Do you need more coverage?

Crime

This type of insurance helps you cover the losses resulting from criminal acts such as robbery, burglary and other forms of theft. Many businesses choose Crime Insurance policies that allow them to file claims for internal theft or other offenses with the potential to cause financial problems.

Cyber Liability

This insurance covers a company in the event of a data breach in which sensitive customer information is leaked. These policies cover expenses, such as notification costs, credit monitoring, fines and penalties, defense costs, and loss resulting from identify theft.

Special Events

This insurance will provide you with coverage if you are throwing a special event. Special Events Insurance will cover claims of bodily injury, property damage and provides coverage for any contractors you hire.

Commercial Auto

Commercial Auto insurance is similar to your personal auto insurance, but it offers higher limits and better coverage than a personal auto insurance can cover. The insurance covers collision damage costs, medical payments, damage incurred from a natural disaster and other related incidents.

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