Insurance for Startup Hedge Funds

You’re Startup Hedge Fund: What Insurance Coverages Do You Really Need?

Updated for clarity on January 21, 2025.  Before you open the doors to your new venture, there’s a couple of basic insurance coverages you’ll need to get started, which we’ll itemize below:

startup hedge fund insurance
  • You’ll need a business owner’s policy or office package.  Sometimes, these policies are called BOP policies (short for business owners policy), and they combine property and liability coverages with a bunch of needed basic coverages.  Regardless of having your own office space or being in a co-working location, this basic policy is essential because of the general liability component, protecting you from claims arising from bodily injury or property damage.  Most policies’ basic liability coverage limit is $1,000,000 per occurrence, but it’s often pretty cheap to increase that to $2,000,000 for a nominal increase.
  • In addition to liability protection, the BOP policy will protect your hedge fund from loss of business personal property (office contents) like computers, office supplies, furniture, fixtures, etc.  These should all be insured at their replacement cost.
  • The cost of a business owner’s or BOP policy for a new fund will run around $1,000 to $3,000 per year.
  • If you have employees, depending on your entity formation (Inc., LLC, LP), you will likely also need workers’ compensation.  Workers comp, as it’s also known, is a “statutory” coverage required by law when you have employees.  Many new funds deploy a PEO (Professional Employer Organization) to handle all aspects of HR, including workers comp and employee benefits. So, no separate policy is required if this is how you’re doing it.  (the same is true of Statutory DBL/Disability insurance in NY.  If you’re in a PEO, they’ll handle this.)
  • The third coverage part we recommend on day one for a new hedge fund is Cyber Insurance.  The risks associated with cyber are very significant, and coverage is relatively inexpensive.  A good cyber policy with limits of $1,000,000 may be as little as $2,000 per year so we see this as almost mandatory.

That’s it! All in you’re looking at somewhere between $3,000 to $5,000 for the year for startup hedge fund insurance.  Now, as you aggregate AUM, you and possibly your investors will also want the firm to have D&O and E&O insurance.  You can read more about those coverage forms here.

Do you want to start the process with us?  You can click the button above to take you to our initial intake form, which you can complete, and our system will automatically forward it to us.  We’ll follow up with you with some ideas for coverages and premiums.  If you’d like to talk to us instead of filling out the form, that’s great too!  Contact me, Gordon B. Coyle at 845-474-2924 / [email protected]

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