Your Series A due diligence includes an insurance checklist. Here's what's on it.

You've signed a term sheet. The due diligence process starts. Your investors' legal team sends a list of requirements. Buried in the corporate governance section, you'll find insurance requirements you've probably never dealt with before.

This isn't optional. Failing to meet insurance requirements can delay your close, trigger renegotiation of terms, or in extreme cases, give investors an exit from the deal.

Here's what you'll encounter, what it costs, and how to get compliant fast.

The standard Series A insurance requirements

1. Key man insurance (almost always required)

What it is: Life insurance on the founders, owned by and payable to the company. Protects the company from the financial impact of losing a founder.

Typical requirement: $1M-$5M per founder, depending on round size and company valuation.

Cost: $50-$150/month per founder for $1M-$2M coverage (varies by age and health).

Timeline to compliance: 2-4 weeks for simplified underwriting ($1M or less). 3-6 weeks for full underwriting (higher amounts).

Why investors require it: They're investing in a team. If half the team dies, the investment thesis changes. Key man insurance ensures the company has cash to survive the transition.

For the full guide, see Key Man Insurance for Startups.

2. Directors & Officers (D&O) insurance (almost always required)

What it is: Protects directors, officers, and the company from lawsuits related to management decisions — shareholder lawsuits, regulatory investigations, employment claims, and more.

Typical requirement: $1M-$5M in coverage. Investors want this because they're joining your board and need protection from personal liability.

Cost: $3,000-$10,000/year for early-stage startups. Varies significantly by industry, revenue, and claims history.

Timeline to compliance: 1-3 weeks for standard policies.

Why investors require it: Your new board members (including the VC partner who just joined) are personally exposed to lawsuits. D&O insurance protects them. No sophisticated investor joins a board without D&O in place.

3. Employment Practices Liability Insurance (EPLI) (sometimes required)

What it is: Covers claims from employees — wrongful termination, discrimination, harassment, wage disputes.

Typical requirement: $1M-$2M coverage. More common at Series A if the company has 20+ employees.

Cost: $2,000-$5,000/year for early-stage startups. Often bundled with D&O.

4. General liability and professional liability (sometimes required)

What it is: General liability covers bodily injury and property damage. Professional liability (also called E&O — Errors & Omissions) covers claims that your product or service caused financial harm.

Typical requirement: $1M-$2M per occurrence. More likely to be required if your product is B2B or handles sensitive data.

Cost: $1,000-$5,000/year depending on industry and risk profile.

5. Cyber liability insurance (increasingly common)

What it is: Covers data breaches, cyber attacks, and the associated costs — notification, credit monitoring, legal defense, regulatory fines.

Typical requirement: $1M-$5M. Required if your product handles PII, financial data, or health data.

Cost: $2,000-$10,000/year depending on data volume and sensitivity.

What's different about key man insurance

Most of the insurance above is standard corporate coverage that protects against lawsuits and liability. Key man insurance is different — it protects against the loss of the people who make the company valuable.

D&O protects your board members from personal lawsuits. Key man insurance protects your company from losing a founder. They serve completely different purposes, and investors require both.

Key man insurance is also the requirement founders most often delay on — because it's personal (requires health information), unfamiliar (most founders have never dealt with life insurance), and feels abstract (death seems unlikely when you're 30 and healthy). Don't delay. Start the application the day you sign the term sheet.

The due diligence timeline

A typical Series A due diligence process runs 4-8 weeks. Insurance requirements need to be satisfied within that window — sometimes as a closing condition (must be in place before wires), sometimes as a post-closing obligation (within 30-60 days after close).

Here's the insurance timeline you should plan for:

  • Week 1: Receive due diligence checklist. Identify insurance requirements. Contact a startup-focused protection specialist.
  • Week 2: Submit applications for key man insurance, D&O, and any other required coverage. Begin underwriting.
  • Week 3-4: Underwriting completes. Policies bind. Send certificates of insurance to investor counsel.
  • Week 4-6: Close the round with all insurance requirements satisfied.

The risk of starting late: if underwriting takes longer than expected (health follow-ups, additional documentation, carrier delays), insurance becomes the bottleneck that holds up your close. Start in Week 1.

The proactive approach

The founders who impress investors are the ones who have insurance in place before the term sheet arrives:

  • Key man insurance: Get covered at seed stage. Lock in lower rates while you're young and healthy. Remove it as a due diligence item entirely.
  • D&O insurance: Get a basic policy when you form the board, even if it's just founders initially. Upgrade coverage at Series A.
  • Buy-sell agreement: Have this in place with your cofounder from day one. It demonstrates governance maturity that investors notice.

When an investor's legal team sees that you've already handled these items, they check the box and move on. When they see that you haven't, it creates follow-up work, delays, and sometimes concern about the founding team's operational sophistication.

Cost summary for Series A insurance package

For a typical two-founder startup raising a Series A:

  • Key man insurance (2 founders, $2M each): $150-$300/month (~$2,000-$3,600/year)
  • D&O insurance: $3,000-$8,000/year
  • EPLI (if required): $2,000-$5,000/year
  • General + professional liability: $1,000-$5,000/year
  • Cyber liability (if required): $2,000-$10,000/year

Total: roughly $10,000-$30,000/year for a complete insurance package. On a $5M+ raise, this is a fraction of a percent of the round — a trivial cost for the protection it provides.

Coverage subject to underwriting approval. Insurance products and pricing vary by state and carrier. Consult your tax and legal advisors for situation-specific guidance.