The possibility of financial loss from an uncertain event.
In insurance, risk refers to the chance that a covered event—like a lawsuit, data breach, or property damage—will occur and result in a financial loss. Insurers assess risk to determine whether and how to cover you.
The most common risks for startups include professional liability (errors in your product or service), cyber liability (data breaches), directors & officers liability (board-level decisions), and general liability (bodily injury or property damage at your office). The specific risks depend on your industry, revenue, and the data you handle.
Insurers evaluate your revenue, industry, employee count, claims history, security controls (like MFA and encryption), and the type of data you handle. This process is called underwriting, and it determines your premium and coverage terms.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.