Insurance considerations to make as you raise funds

Liam Green

Read • 9 min

When you’re scaling quickly, insurance may seem secondary. But it can be a protector and growth enabler. Here are the essentials to consider – no matter what your journey looks like.

As your company scales, the right cover becomes a strategic asset, acting as a safety net while preparing you to tackle the challenges ahead. This can prove particularly pertinent when attracting investors, who often require you to have certain policies as an essential part of their due diligence process.

But is your business adequately insured to support its growth? To help you answer that, we’re highlighting the key considerations you need to make – both as you gear up for a funding round and in the months afterwards. From essential protections as an emerging startup to the more specialised coverage required as you raise capital and expand, we’ll also guide you through the policies you’re likely to encounter.

Pre-raise considerations: Communication and the basics🔗

One of the first steps if you’re looking to raise capital is to conduct a comprehensive review of your existing policies. Do they reflect the business you're running now, and the one you're aiming to build? Start by making sure that your coverage is appropriate for your team size, location, product development, and international expansion plans. You then need to adjust accordingly and make sure every relevant party is made aware.

Notify your insurer of investment rounds and future plans🔗

Before you raise funds, it’s important to notify your insurer about the investment round and your business’ future plans. By being transparent, you enable them to evolve your policy in line with your needs. Whether you’re planning to use the money to add new board members, expand overseas, or ramp up product development, your insurer needs to be kept in the loop so they can help you adjust coverage accordingly.

Align your coverage with investor expectations🔗

Investors often want reassurance that your company has the right protections in place – especially as you scale. That means designing your insurance coverage to meet their expectations, and making sure it’s robust enough to handle the dynamic nature of a growing business. Directors’ and Officers’ (D&O) and Key Person insurance are two policies that are often required by investors before they provide funding. They offer protection for the individuals who drive your business forward – guaranteeing your operations continue running smoothly, no matter what happens.

Get Directors’ and Officers’ and Key Person insurance in place🔗

Your shareholders’ agreement will likely require D&O and Key Person insurance. Often, you’re given 90-100 days to get this in place.

Shield your leadership with D&O insurance🔗

D&O insurance is one of the most important policies for founders and senior leadership. It protects directors and senior leaders from personal liability claims related to mismanagement. This could include issues like misleading investors, regulatory breaches, or insolvency problems.

For instance, if a director makes a statement that leads to allegations of negligence, D&O insurance can cover legal fees, settlements, and any related costs. This gives your leadership team peace of mind knowing they won’t be personally financially liable for any hiccups.

Protect your core team with Key Person insurance🔗

As a small, fast-growing business, it’s typical for scale-ups to rely on a few key individuals with unique skills or knowledge – making their absence a significant risk. What happens if one of these people becomes ill or injured and can’t perform their role? That’s where Key Person insurance comes in.

This policy provides financial protection for your business in case a core team member can no longer work due to illness, injury, or death. For example, if your co-founder is diagnosed with a serious illness and needs to step away from the business, Key Person insurance would provide the financial support needed to keep things running until you find a replacement.

Pre-raise considerations: Funding allocation and relevant cover🔗

Once you have D&O and Key Person insurance in place, it’s time to think about the other risks that come with growth. Where will you be spending your capital? Will you expand internationally? Hire more staff? Develop new products? These decisions will affect your insurance needs.

Expansion and subsidiaries🔗

When you’re expanding into new regions or launching subsidiaries, your insurance needs to keep pace with your operations. But it can be a complex area. For instance, in the EU, certain health insurance and employee protections are mandated. In the US, however, it can vary from state to state, so double-checking that your policies comply with local laws and regulations is key.

Check your responsibilities for US operations🔗

The US market has its own set of insurance requirements, and non-compliance with regulations can lead to costly penalties. So, it’s crucial to consult with an insurance expert who has a good grasp of local laws. Depending on the state, you may need specialised coverage like General Liability or Employment Practices Liability. Product Liability insurance also becomes a necessity – particularly if you’re selling goods or services directly to US customers. This cover protects your business from claims relating to injuries or damages caused by your products.

Cover your team for international travel🔗

If your team’s going to be on the move, comprehensive Business Travel insurance should be a priority. It covers the things you’d expect – including travel delays and cancellations – as well as personal injury and medical emergencies abroad. This type of insurance is particularly pertinent for long-term projects or teams working overseas.

Protect your stock while shipping overseas🔗

Marine Cargo insurance is non-negotiable if your business ships physical products. When you’re transporting goods internationally – whether by sea, air, or land – you face risks like theft, damage, or delays. With Marine Cargo insurance, you can protect your stock during transit and help ensure business continuity if a shipment is delayed or lost.

New product or service launch🔗

If part of your raise is going towards launching a new product or service, you need to consider what this means for your insurance.

Cover what you sell against claims🔗

Product Liability insurance is again essential when launching new products, especially in sectors with strict regulations. Similarly, Professional Indemnity insurance will safeguard you against claims for financial losses caused by your work – whether due to errors, omissions, or services that are deemed unsatisfactory. For instance, if a client blames a costly operational failure on the IT solution you built for them, this type of insurance covers any ensuing legal expenses.

Keep your inventions and innovations secure🔗

With the development of new products or services, intellectual property becomes a valuable asset. Protect your IP through insurance that covers legal fees and damages if someone infringes on your patents, trademarks, or copyrights – or if someone claims you infringed on theirs.

Structural or organisational changes🔗

As your business grows, internal changes – whether it’s a shift in leadership, new hires, or a team restructure – will call for new insurance considerations.

Employers’ Liability insurance is a legal requirement, but you’ll need to review your coverage and its limits again if you’re making changes to your team. This protects your business in case of injury or illness. For example, if a member of your remote workforce injures themselves during work hours, and your business failed to carry out a health and safety risk assessment although the accident wasn’t your fault, you could face expensive legal fees.

Employment Practices Liability insurance also becomes more relevant. This type of insurance covers claims related to wrongful dismissal, harassment, discrimination, and other workplace issues. For fast-growing companies, it’s something you can’t afford to skip, since the risk of these increases with employee numbers.

Prevent business interruption🔗

If you’re scaling your business and expanding your product offerings, interruptions – such as natural disasters, problems in your supply chain, or equipment failures – can lead to significant financial setbacks. Having Business Interruption insurance in place helps mitigate the effects of these disruptions by covering lost income and operational costs while you get things back on track.

Stay safe in the digital world🔗

The bigger your business becomes, the broader its digital footprint gets. From sensitive customer data to financial systems, hackers will have their eye on your operations. Cyber insurance covers the costs of data breaches, ransomware attacks, or other cyber-related threats – everything from forensic investigations to regulatory fines and reputational damage. This enables your business to bounce back quickly and rebuild customer confidence.

Post-raise considerations: Future growth and strategy🔗

As your business progresses, every major decision introduces new risks that require thoughtful, tailored coverage. Each time your business undergoes a significant change, such as a shift to a new TopCo or expansion into new territories, you’ll need to review your coverage and update policies accordingly.

Align your insurance with your business goals🔗

All financial decisions should align with investor expectations to maintain their confidence and support long-term growth. Typically, investors have specific goals – things like profitability, risk management, and sustainability – which influence their expectations. Your insurance falls into this financial strategy, and when your policies reflect investors’ goals, it demonstrates your commitment to championing their interests. Ultimately, this helps to build transparency, allowing stakeholders to feel secure in their investments. Getting this right is key to securing funding further down the line, as well as navigating growth and managing risks – all the while keeping your business’ reputation intact.

Stay ahead with regular health checks🔗

Regular health checks are a smart way to make sure your coverage stays relevant – including benchmarking against your risk register. By consistently reviewing your coverage, you can identify any gaps or areas where limits may need to be adjusted.

Optimising your insurance programme setup is another critical step for keeping your business protected. As your needs evolve, you might find that separating coverage into individual policies or consolidating them into one can keep your coverage comprehensive and affordable – and who doesn’t want that?

Protect your growth with comprehensive coverage🔗

Whatever growth stage you’re at, having the right insurance in place can make or break your business. Policies like D&O and Key Person offer essential protection, but as you expand internationally, develop new products, and hire new staff, your needs will change.By teaming up with a proactive insurance partner and regularly reviewing your policies, you’ll safeguard your company’s future and meet investor expectations – positioning your scale-up for long-term success.