Five insurance questions AI companies should answer before their next funding round

1. What can the product cause—not just what does it do?

Start with outcomes. Could an error cause a customer to lose revenue, make a faulty decision, disclose confidential information, infringe intellectual property or suffer physical harm? A policy written around a generic software description may not reflect the company’s actual use cases.

NIST’s AI Risk Management Framework emphasizes mapping context, impacts and affected parties. That same exercise improves an insurance submission because it connects the technology to credible loss scenarios.

• List every production use case and prohibited use.
• Identify whether outputs inform or execute decisions.
• Document human review, testing, monitoring and rollback controls.

2. Do customer contracts promise more than insurance will cover?

Review indemnities, liability caps, performance commitments, data-security obligations and insurance requirements together. Broad contractual liability, service credits and warranties may not fit neatly within technology errors and omissions coverage.

Before signing a major customer, ask the broker and coverage counsel to compare the contract language with the actual policy—not only the certificate of insurance.

3. Where does the training and customer data come from?

Underwriters increasingly want a clear inventory of proprietary, licensed, public and customer-provided data. The company should be able to explain permissions, retention, security, deletion and how confidential data is prevented from entering unintended workflows.

Cyber coverage addresses many privacy and security events, while technology E&O generally responds to claims that the product or service failed. Neither label alone confirms coverage for every data or AI allegation.

4. Are the limits and policy dates built for the transaction?

Funding, rapid hiring and enterprise contracts can change exposure faster than an annual renewal cycle. Confirm whether limits satisfy key contracts, whether defense costs reduce the limit, and whether claims-made policies preserve prior acts and continuity dates.

5. Can management prove the controls described in the application?

Insurance applications become part of the underwriting record. Responses about access controls, backups, testing, incident response and AI governance should be accurate and supported by evidence. A concise control packet can improve both underwriting and investor diligence.

The goal is not to claim that every risk has been eliminated. It is to show that the company understands its exposures, has accountable controls and has intentionally transferred the risks it cannot retain.