Does a startup need a specialist insurance broker?
It depends on what is driving the purchase. If your business is simple, your coverage is mostly standard, and your broker answers your questions, a generalist can serve you well. The picture changes when the requirement comes from an investor, a customer contract or a board seat. The requirement says what they want to see; the policy wording decides whether the policy fits your business: which entities are named and whether it describes the product you sell. A broker who reads that wording before you buy is the one you want, at any size.
What prompts a startup to call a broker
Most startups buy insurance because something requires it, and each trigger calls for a different kind of coverage:
- Your first employees. Workers’ compensation (coverage for employees who are hurt or become ill because of their work) depends on where each person works, so a remote team in several states means several sets of rules. Claims about how employees are treated, such as discrimination or wrongful termination, fall under a separate policy, employment practices liability insurance (EPLI), subject to its terms and exclusions.
- A funding round or a new board member. Investors often ask for directors and officers insurance (D&O, for claims against founders, officers and the board over how the company was run) as part of a round, and new board members often ask whether it is in place.
- A customer contract. Larger customers usually spell out the insurance they expect: which coverages, how much, and what proof.
- A lease, a new product, a new location or a new business model. A policy is written for the business you described when you bought it, so a change in what you sell, the data you handle or where you work is a reason to call.
What the broker does with that call
The first job is sorting. Not every startup needs every policy: a software company, a consultancy and a hardware maker face different risks, and what you sell, who you sell to and where your people work decide what you need. A broker tells you which coverages apply to your business, which you need now and which can wait.
The second job is reading the thing that prompted the call. An investor’s request or a customer’s insurance clause tells you what they want to see. It does not tell you whether a policy fits your business. Send the actual clause or the financing documents, not a summary. The broker reads them for the insurance points only, and checks:
- Which coverages and limits (the most a policy pays) the contract names.
- Whether the customer wants to be added to your policy as an additional insured, so that it protects them too, or asks for other specific terms.
- Whether the policy describes the product or service you actually deliver. Technology errors and omissions coverage (E&O, for claims that your product or service did not work as promised) may respond only to the services the policy describes, so the description has to match what you actually sell.
- What proof of insurance they need, and by when.
Getting terms and comparing them
With the requirement understood, the broker takes your details to the insurance market for terms that fit and sets the quotes side by side, including the fine print, so you can decide with a broker’s advice rather than from a price alone. Policies that look alike can differ in what they describe and exclude, and what a policy covers always depends on its terms and exclusions.
If you already have policies, a broker reads them first and tells you in plain English what you have and what is missing. Changing brokers does not mean changing policies: a new broker can usually review your current policies now and take them over at renewal, when the policy term ends and it is bought again, and your current policies stay in force as long as you keep them, so there is no gap while you decide.
After you buy, and how Cilantro works with startups
A policy is written for the business you described when you bought it. If you start selling something new, handling new kinds of data or working from a new place, tell your broker, who asks the insurer to update it. The same goes for the next funding round, the next big customer and the renewal.
To get started with Cilantro, send us what you do (a plain description of the product or service and who uses it), how you operate (entities, locations, headcount, revenue, and the data or equipment you rely on), what is changing (hiring, fundraising, a new customer, a launch or a renewal), and what you have been asked for (contract clauses, investor requests, deadlines and any current policies). If you have no insurance yet, that is fine: tell us what you are building and what put insurance on your list, and we start from scratch.