Question
What insurance does a biotech need before Series A?
Short answer
Before Series A: D&O at $1M-$5M (mandatory at term sheet - VCs require it), basic commercial general liability, workers compensation (state-mandated), cyber liability for IND data and drug master file at $1M-$3M, employment practices liability once headcount exceeds 10-15. Clinical trial liability gets added when first-in-human dosing approaches. Products liability is not yet needed - that activates 6-12 months before commercial launch.
D&O is the term-sheet trigger
VCs investing in biotech require D&O insurance as a closing condition. Term sheets routinely include a clause requiring D&O of at least $1M-$5M with side A coverage. Pre-Series A operators with seed-stage institutional capital typically bind D&O at $1M-$3M; Series A round size frequently steps up to $5M-$15M.
The D&O placement at this stage should include: Side A for individual director coverage, Side B for company indemnification reimbursement, Side C for entity coverage in securities claims. EPL extension is sometimes bundled but should be evaluated separately given EPLI is a different exposure.
Pre-Series A coverage stack
D&O at $1M-$5M (mandatory at term sheet).
Cyber at $1M-$3M sized to drug master file (DMF), IND data, and trade secret exposure. Trade secret extension is load-bearing - generalist cyber forms do not always include DMF in trade secret scope.
Commercial general liability (CGL) at $1M/$2M for premises and ongoing-ops coverage.
Workers compensation at statutory limits + $1M employers liability. State-mandated.
Employment practices liability (EPLI) at $1M-$3M once headcount exceeds 10-15.
Commercial auto if the operator owns or leases vehicles.
Property at replacement cost for lab equipment if the operator owns or leases lab space.
What gets added as the biotech grows
Clinical trial liability (CTL) - added before first-in-human dosing. First-in-human Phase 1 trials baseline at $5M-$10M per trial; gene therapy or biologics push to $10M-$25M.
Fiduciary liability - added once the biotech sponsors a 401(k) plan or has plan assets above the ERISA fiduciary threshold.
Crime insurance - added once the biotech has meaningful liquid assets or AR/AP volume.
IP infringement defense - added if the biotech in-licenses platform IP from an academic institution (often through Penn Center for Innovation, Memorial Sloan Kettering Office of Technology Development, or similar academic TLOs).
Tech E&O - added if the biotech offers any development services to other sponsors.
Premium budget for pre-Series A
Total annual insurance budget for a pre-Series A biotech operating at 10-25 employees: $30K-$80K typically. D&O is the largest line item ($15K-$40K), followed by cyber ($5K-$15K), workers comp ($3K-$10K), CGL ($3K-$8K), EPLI ($3K-$8K), property/auto/crime ($2K-$5K).
Primary sources
Sources and references
This answer draws on the following regulatory, statutory, and standards-body sources. Coverage availability and program structure also depend on carrier appetite and underwriter discretion not captured by these sources.
- Delaware General Corporation Law - Director Indemnificationhttps://delcode.delaware.gov/title8/c001/sc04/index.html
- SEC - Investor Bulletin: Initial Public Offerings (IPOs)https://www.sec.gov/about/reports-publications/investor-publications/initial-public-offerings-investor-bulletin
Related practice areas
Insurance clauses in this area
Related questions
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