Most companies using AI tools are underinsured. Traditional cyber policies were written before AI existed — they don't cover model failures, hallucination liability, training data exposure, or AI-specific regulatory risk. Here's what the gap looks like and how to close it.
A year ago, "tech company insurance" meant cyber liability for breaches and E&O for software bugs. That's still true — but AI adds a new category of risk that's entirely uncharted territory for most insurers.
When your product includes AI-generated outputs that a customer acts on, you have taken on liability that didn't exist in software before. If a legal AI tool gives wrong advice, a medical AI suggests a dangerous interaction, or a hiring AI discriminates by proxy — the companies deploying those tools face exposure. Whether you built the model or just integrated it.
Harm caused by AI-generated content, recommendations, or decisions your product delivers to end users. Standard E&O typically excludes AI-generated work.
Regulatory fines and civil claims from biased AI decisions in hiring, lending, housing, or healthcare — even when unintentional. Growing enforcement in 2026.
Copyright infringement claims from data used to train or fine-tune models, or PII exposure from training datasets. Several major cases active in 2026.
Prompt injection, model manipulation, and adversarial inputs that cause your AI to produce harmful outputs or exfiltrate data. Mostly uncovered by current policies.
Standard cyber insurance was designed around a single threat model: an external attacker gains unauthorized access and causes harm. AI risk is different — the harm often originates from the system working exactly as designed, just producing an output that damages someone.
| Coverage Area | Traditional Cyber | Tech & AI Policy |
|---|---|---|
| Data breach / ransomware | ✓ Covered | ✓ Covered |
| Business interruption (hacks) | ✓ Covered | ✓ Covered |
| AI output / hallucination liability | ✗ Excluded | ✓ Covered |
| Algorithmic discrimination claims | ✗ Excluded | ✓ Covered |
| Training data copyright / PII | ✗ Excluded | ✓ Covered |
| EU AI Act / regulatory defense | ✗ Excluded | ✓ Covered |
| Prompt injection / adversarial attacks | ✗ Excluded | ⚬ Varies |
| Third-party AI tool failures (OpenAI, etc.) | ✗ Excluded | ⚬ Negotiable |
The EU AI Act is in enforcement phase. The FTC is actively investigating algorithmic harms. State-level AI liability laws are passing quarterly. Companies that thought their standard cyber policy covered them are discovering exclusion clauses they didn't know existed — at renewal, or worse, mid-claim.
Not every company needs the same policy. But if any of these apply, review your coverage now:
Companies where AI is the product. Highest exposure — model outputs are your core deliverable.
SaaS companies that have embedded AI features. You may inherit liability even as a downstream consumer of an AI API.
Companies deploying AI for internal decisions (HR, finance, operations) face discrimination and governance liability even without a commercial product.
Cyber insurance is one policy in a stack. The gaps between policies — where your cyber stops and your E&O starts, where your general liability excludes tech — are exactly where uninsured losses occur. Here's what a properly structured tech company carries:
First-party losses from breaches, ransomware, business interruption. Now needs AI addendums for modern companies.
Third-party claims from software or AI product failures. The policy where AI output liability lives — if your insurer covers it.
Executive liability for governance decisions, including AI oversight failures. Increasingly required by boards and investors.
Standard bodily injury, property damage, advertising liability. Baseline — doesn't cover tech or AI risks by itself.
Most companies have some of these but not all, and the policies weren't purchased as a coordinated stack. Corgi specializes in building modular coverage where each policy is scoped so nothing falls through the gaps.
We've partnered with Corgi Insurance to help our community get proper AI-era coverage. Corgi specializes in Tech & AI insurance for startups and growing companies — they've built the modular policies that address what traditional carriers still don't. The consultation is free, no pressure, and takes about 30 minutes.
We track coverage trends, new AI liability cases, and policy changes that affect tech companies. No vendor pitches — just the signal on what's actually happening in the AI insurance space.
Coverage gaps, new AI risk patterns, and what's changed in the tech insurance market.