Funding, Fraud & Lawsuits: Why Every Entrepreneur Needs Insurance To Tackle Legal Risks
India's startup boom ranks it third globally, but rising legal risks are prompting startups to invest in liability insurance.
News18
India's startup boom has turned the country into the third-largest startup ecosystem globally. But as businesses grow, so do the risks. From consumer claims and cyber threats to regulatory challenges and investment disputes, today's entrepreneurs face a host of legal vulnerabilities. In such a climate, insurance isn't just a backup plan—it's a strategic shield.
Experts stress that having the right policies in place can protect founders, investors, and the businesses they're building.
Why Legal Risk Is on the Rise
'As legal risks become more prominent, many startups are increasingly investing in liability insurance," says Aftab Chaz, Associate Director & Business Head at Elephant.in. He explains that lawsuits around bodily injury, product defects, negligence, and professional errors are becoming more frequent across sectors.
This trend has led to growing demand for Comprehensive General Liability, Professional Indemnity, and Directors & Officers (D&O) insurance. According to Chaz, these policies are crucial in shielding businesses from financial and reputational losses while improving investor confidence.
PE and VC transactions are at an all-time high in India, but with rising deal sizes come bigger risks. Tapas Nandi, Director – Infrastructure & Energy at Alliance Insurance Brokers, notes, 'With increased financial frauds and cyber threats, even a minor slip in a major deal can cause serious damage."
He recommends that early-stage startups and their investors consider a Business Owners Policy (BOP)—a bundled solution covering general liability, commercial property, and business interruption. He adds that Venture Capital Liability Insurance can help protect investors from errors, omissions, and legal challenges tied to deal-making or board-level responsibilities.
Founders Must Think Holistically
Mudassir Khalil, Head – Reinsurance, Surety & Liability at Digit Insurance, outlines five key insurance policies every entrepreneur should consider:
Comprehensive General Liability (including product & public liability)
Professional Liability Insurance (for service-related risks)
D&O Insurance (to protect leadership teams)
Employee Compensation (for workplace injuries)
Warranty & Indemnity (W&I) Insurance (to cover deal breaches)
'These covers not only reduce financial damage during a crisis but also build a culture of risk preparedness," says Khalil.
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