Guide
The $50K Question: How Much Coverage Do You Actually Need?
A Decision Framework for Coverage Limits
A 2-page guide for founders trying to work out if they need $1M, $5M, $10M, or $20M in coverage.
Why this matters
Every insurance policy asks: “How much coverage do you want?” The difference between $5M and $10M might only be $200/year—but the wrong choice could cost you a $100k contract or leave you personally liable for damages above your limit.
This guide helps you pick the right coverage amounts without overthinking it.
The short answer
What most founders need
For most small business founders:
- Public Liability: $10M minimum ($20M if working on large sites or with enterprise clients)
- Professional Indemnity: $1-2M for early stage, $5M+ as you scale
- Cyber Protection: $250k-$500k for startups, $1M+ if handling sensitive data
- Workers Comp: Unlimited (mandated by law, not optional)
Why these numbers? Industry standards, client contract requirements, and realistic worst-case scenarios.
How to decide
The three-question framework
Question 1
What do your clients/contracts require?
This is non-negotiable. If your client contract requires $20M Public Liability, you need $20M. No exceptions.
Common requirements:
- Government contracts: $20M Public Liability
- Enterprise B2B clients: $10-20M Public Liability, $5M+ Professional Indemnity
- Commercial leases: $10M minimum Public Liability
- Construction sites: $20M Public Liability
- SME clients: $10M Public Liability, $1-2M Professional Indemnity
Question 2
What's your realistic worst-case scenario?
Think about what could actually go wrong in your business:
Example 1: Marketing consultant
- Worst case: Your advice leads to a failed product launch costing the client $500k in lost revenue
- Coverage needed: $1-2M Professional Indemnity
Example 2: Electrician
- Worst case: Faulty wiring causes a fire, destroying a $2M building
- Coverage needed: $10M+ Public Liability
Example 3: Software developer
- Worst case: Data breach exposes 50,000 customer records, $200k in notification costs + $300k in fines
- Coverage needed: $500k-$1M Cyber Protection
Example 4: Event planner
- Worst case: Structural failure at your event injures 20 people, $5M in claims
- Coverage needed: $20M Public Liability
Question 3
What can you afford vs. what do you need?
Premium increases happen for three reasons:
| Public Liability | Typical Annual Premium |
|---|---|
| $5M coverage | $400-600 |
| $10M coverage | $500-700 |
| $20M coverage | $600-800 |
- Losing a $50k contract because you don’t meet requirements
- Being personally liable for $12M in damages when your $10M policy maxes out
- Spending more time arguing with clients about Certificate of Currency requirements
The coverage mistakes that cost founders
Mistake #1: Choosing coverage based on price, not requirements
Cost: Lost contracts, rejected tenders, and inability to work with enterprise clients.
Mistake #2: Underinsuring on Professional Indemnity
Cost: Personal liability for damages above your policy limit. If you caused $3M in losses but only have $1M coverage, you’re personally liable for $2M.
Mistake #3: Not checking contract requirements before quoting
Cost: Winning work you can’t legally do, then scrambling to upgrade coverage mid-contract (higher premiums, stressful).
Mistake #4: Forgetting coverage limits apply per claim, not per year
Cost: Thinking “$10M coverage” means unlimited claims. It’s $10M per incident. Two major claims in one year = two separate $10M limits.