These days, artificial intelligence (AI) might be the hottest topic in the tech world. Recently, household names like Google and Apple have taken steps to integrate AI features with their products at a deeper level than ever before. And, of course, ChatGPT has become a ubiquitous service of its own since its introduction in late 2022.

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Since AI is such a hot topic right now, it’s easy to understand why you’d want to form a company in this field—but you’ll need to take some precautions first. AI technology companies face all sorts of dangers, including (but not limited to) cyberattacks, worker injuries, and employee misconduct. To establish a successful AI business, you’ll need to understand these risks and know what insurance policies can help you overcome them.

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^{What is an AI technology company?}

An AI technology company is any business that focuses on artificial intelligence. This category includes both massive companies like OpenAI and smaller startups using artificial intelligence in new and innovative ways.

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While the market for AI technologies is already sizable, investment in this space should increase significantly in the coming years. In 2023, the AI market was valued at roughly $200 billion; by 2030, this industry could reach $1.8 trillion. 

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^{What risks do AI technology companies have?}

Like other tech businesses, AI technology companies face a wide variety of risks. Some dangers your artificial intelligence-related business could face include:

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^{Work errors}

If your AI business gets accused of an oversight or error, you might face serious consequences—potentially including legal action. And as you might expect, a lawsuit will make it much harder for your business to take care of everyday operations.

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^{Data breaches}

Since they deal with cutting-edge technology, AI companies are an attractive target for cybercriminals. Because of that, you should always be prepared for the possibility of cyberattacks.

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^{Third-party accidents}

Even if they aren’t open to the general public, most AI companies have occasional visitors. Of course, that means a delivery person or someone else could get injured while visiting your facility.

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^{Employee misconduct}

No matter how much you trust your employees, it’s impossible to eliminate the possibility of worker theft or fraud. This is a particularly prominent danger for tech-related companies, as these companies deal with massive amounts of sensitive data. 

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^{Worker injuries}

Artificial intelligence can’t experience injuries, but the people building AI products are only human. If your employees sustain injuries on the job, you could have to cover their short-term and long-term medical costs.

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^{Car accidents}

Many tech companies use professional vehicles, but this opens your business up to the risk of automotive accidents. In the event of a car crash involving your professional vehicle, you could get stuck with massive expenses without the right insurance.

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^{What insurance do they need?}

Since you can’t eliminate the risks listed above, your AI technology company should do the next best thing by covering its bases with insurance policies. Some of the most crucial forms of coverage for businesses in this field include:

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^{Technology errors and omissions insurance}

As its name suggests, technology errors and omissions insurance (tech E&O) comes with errors and omissions coverage—that is, coverage that helps your business when it’s accused of negligence and mistakes. However, these policies go beyond “standard” E&O policies by including third-party cyber insurance.

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Between these two types of coverage, technology E&O insurance can help your AI business deal with:

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• Oversights and mistakes
• Breaches of contract
• IP/media liability (in some professions)
• Failure to deliver services as promised
• Lawsuits from clients after a cyberattack

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^{Cyber insurance}

If you’re responsible for an artificial intelligence-related company, you have a higher-than-average risk of cyberattacks and data breaches. Since tech E&O insurance contains third-party cyber insurance, it can help you deal with the consequences of these situations—to an extent, anyway.

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To fully protect your business from situations like these, you’ll need first-party cyber insurance. These policies can assist companies when they need to cover the following costs:

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• Data and asset recovery
• Notifications to affected parties (including people and organizations)
• Ransom payments
• Investigation into cyberattacks
• Lost revenues resulting from a data breach
• PR management
• Protection of stakeholders

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^{General liability insurance}

Though every policy discussed in this article is important, few forms of insurance do more to protect AI businesses than general liability insurance. This is the first policy many companies need, as having general liability insurance is a common requirement for a commercial lease.

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When your company has general liability insurance in place, you’ll get valuable protection against risks like:

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• Client personal injuries
• Slander and other advertising injuries
• Client personal property damage

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If your AI business is small enough, you may have the opportunity to bundle this form of insurance with commercial property insurance by purchasing a business owner’s policy (BOP). Businesses that are eligible to save money with a BOP usually have less than 100 workers, make less than $1 million per year, and have small offices.

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^{Fidelity bonds (Crime Insurance)}

When a person working at your AI technology company commits a crime like theft, fraud, or forgery, your business could be held liable for the damages. Fortunately, fidelity bonds can help.

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If you have fidelity bonds, you’ll receive liability coverage if an employee:

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• Commits fraud or theft
• Illicitly transfers electronic funds
• Unlawfully accesses data

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However, it’s important to note that fidelity bonds don’t work like other types of insurance. Instead, you must pay these bonds in full to the bond issuer.

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^{Workers’ compensation insurance}

When you think of worker injuries, you may imagine people working at factories and on construction sites—but employees can sustain injuries anywhere. If a person working at your AI business gets hurt on the job, you could easily end up facing financial losses or litigation.

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Workers’ compensation insurance can help businesses:

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• Cover injury and illness expenses. With a workers’ compensation insurance policy, your company can get help paying for medical bills, ongoing healthcare expenses, and disability/death benefits.
• Pay for employee injury-related lawsuits. Most workers’ compensation insurance policies include employer’s liability insurance, which can make it easier for businesses to afford attorney’s fees, court costs, and settlements.
• Comply with state law. With the exceptions of South Dakota and Texas, technology companies are required to offer workers’ comp.

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^{Commercial auto insurance}

Auto accidents can cost businesses thousands of dollars—a sum that could have severe consequences for small companies. Because of that, businesses that have their own vehicles must invest in commercial auto insurance.

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With a commercial auto insurance policy, your company will receive assistance paying for property damage, lawsuits, medical expenses, and other costs after an accident occurs. You’ll also get financial help in the event of automotive theft or vandalism/weather damage. And since some businesses rely more heavily on their vehicles than others, you can adjust your AI company’s auto insurance to meet its unique needs.

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^{How much does it cost?}

As is the case for any other business, AI companies can’t benefit from insurance if they don’t invest in the policies they need. With that in mind, here’s how much you’re likely to pay for the insurance coverage described in this article:

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• Technology errors and omissions insurance: $67/month
• Cyber insurance: $148/month
• General liability insurance: $30/month
• Fidelity bonds: $107/month
• Workers’ compensation insurance: $34/month
• Commercial auto insurance: $198/month

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^Conclusion

While AI is an exciting field, companies in this space need to watch out for various risks. However, these dangers shouldn’t be enough to hold you back—at least, not if you purchase the right insurance policies early on.

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Once your business has access to policies such as cyber insurance, general liability insurance, and workers’ compensation insurance, you’ll have your bases covered in terms of risk mitigation. And instead of worrying about unpreventable threats, you’ll have the freedom to create groundbreaking AI products.

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