What insurance do investors require for startups?

The question usually arrives the way one seed-stage SaaS founder put it: “Investor wants D&O insurance before board seat.” That’s the shape of startup insurance requirements — not a statute, not a regulator, but a specific person with leverage making coverage a condition of something you want. Knowing which demands are standard, which are situational, and why each exists lets you respond to the checklist instead of being surprised by it.

The standard ask

The first three form the recurring core. Specialist startup brokers state it directly: investors typically expect D&O by or shortly after a priced round, along with general liability and cyber; crime and key person coverage may also be required depending on the company’s risk profile.

Why D&O tops every list

The board seat explains it. An investor director is personally named in any suit alleging the board mismanaged the company — brought by other investors, creditors, regulators, or eventually an acquirer’s shareholders. The company’s indemnification promise is the first line of defense, but it fails exactly when things go badly: an insolvent company indemnifies no one. D&O insurance, and specifically its Side A protection for individuals the company can’t indemnify, is what makes board service rational for someone with personal assets. The full structure is laid out in what D&O insurance covers; the timing question has its own page.

How the requirement actually arrives

There’s no statute to look up. The demand shows up in the deal’s paperwork and process — a line in the closing checklist, a condition communicated by the investor or their counsel, sometimes a plain pre-board-seat email like the one founders quote on forums. That informality cuts both ways: it means the requirement is negotiable in theory, and it means there’s no published standard to appeal to. In practice, D&O-before-board-seat is common enough that resisting it costs more goodwill than the premium conversation is worth, while the risk-profile lines (crime, key person) genuinely vary deal to deal.

What isn’t standard

Two things founders should not assume. First, there is no universal required limit — the amount of D&O or cyber an investor expects is set in the conversation, not by a market table, so ask the investor directly what will satisfy the condition. Second, investor requirements and customer requirements are different lists: closing a round gets you D&O, GL, and cyber, but closing an enterprise contract will separately demand E&O — see what startups need to close customer contracts. Budget for both lists; they arrive in the same year for most B2B companies.

Questions founders actually ask

What insurance do investors expect startups to have? D&O, general liability, and cyber as the recurring core, with crime and key person coverage where the risk profile warrants. D&O is the one most often made an explicit condition.

Seed-stage SaaS — investor wants D&O before taking the board seat. Is that normal? Yes, entirely. It protects their partner’s personal assets for decisions made on your board, and it protects your own officers on the same terms.

Is D&O insurance mandatory? Not by law, anywhere in the US. It’s mandatory the way a lease’s insurance clause is mandatory: the counterparty won’t proceed without it.

Do all companies have D&O insurance? No — plenty of founder-only, debt-free companies defer it. The population that almost universally carries it is companies with outside directors, which is what a priced round makes you.

Sources are linked below. Requirements are set deal by deal; your term sheet, closing checklist, and investor’s counsel are the controlling texts.