For hardware companies—especially those building robots, IoT devices, consumer electronics, or manufacturing equipment—the stakes are high: one defective part or data breach can result in costly litigation or reputation damage.

Companies in the hardware space often face outsized risk early in their lifecycle. Unlike pure software companies, hardware firms ship physical products, which introduces safety and product liability exposures from day one. 

The right insurance helps manage these risks, align with contractual obligations, and ensure you’re not left exposed as you scale.

Why Business Insurance Costs Vary by Industry

Insurance premiums are fundamentally based on risk. Because each industry carries a different risk profile, insurers evaluate and price coverage accordingly. A fintech startup handling sensitive financial data will be underwritten differently than a healthtech company working with patient records—or a hardware company that ships lithium battery-powered devices.

For hardware companies, insurers consider risks like product failure, manufacturing errors, bodily injury from defective devices, and even supply chain disruptions. The presence of physical goods and complex liability chains (manufacturer, supplier, distributor) means hardware companies often need broader and deeper protection, which can influence pricing.

Typical Insurance Costs for Hardware Companies

There’s no one-size-fits-all price tag for insurance. Premiums vary widely based on a company’s operations, growth stage, coverage needs, and claims history. 

However, it’s fair to say that for hardware startups, the complexity of physical products and their associated risks often means they may need more of certain types of insurance, like Product Liability.

Rather than focusing on a single price point, founders should understand what drives costs and how to manage them.

Key Cost Drivers of Business Insurance

Company Stage and Size

Early-stage hardware startups may pay less in total premiums due to their smaller size, but they may also lack historical data, which introduces uncertainty for underwriters. As the company grows—hiring staff, shipping more units—insurance needs expand, and so do costs.

Revenue and Capital Raised

Revenue is often used as a proxy for risk exposure: higher revenue generally means more customers and more transactions, and a bigger target for bad actors. Capital raised also signals growth potential and operational complexity. Insurers may use this data to project future risk, which can raise D&O or Product Liability premiums.

Number of Employees

More employees mean more potential for employment-related claims, especially around wrongful termination or discrimination. This affects Employment Practices Liability (EPL) coverage costs. Additionally, headcount growth often correlates with greater infrastructure, equipment, and cyber risks.

Claims History and Risk Profile

A history of product recalls, customer lawsuits, or workplace injuries can drive up costs significantly. Carriers scrutinize past claims as predictors of future ones. Conversely, a clean record and strong safety protocols can help reduce premiums over time.

Industry-Specific Risk Factors That Impact Premiums

Hardware companies face unique risks that are less applicable to other industries:

• Product liability: A malfunctioning sensor or wearable can cause bodily injury or property damage. Claims here are often expensive and complex.
  
• Shipping & transit exposure: Goods damaged en route to customers or distributors require Inland Marine or Cargo Insurance.
  
• Cyber-physical risks: Connected devices can be hacked, creating both digital and physical harm.
  
• Supply chain and component risks: Manufacturing defects due to upstream suppliers can lead to costly recalls or litigation.
  
• E&O overlaps: If hardware is bundled with software or AI, tech E&O coverage becomes essential.
  

How Hardware Companies Can Afford the Right Insurance Coverage

Smart insurance purchasing is as much about strategy as it is about spending. Here are ways hardware startups can secure strong coverage while managing cost:

• Review policies regularly: As your risk changes with new markets, product launches, or team size, your coverage should evolve too.
  
• Partner with specialized insurers: Brokers like Vouch focus on frontier industries and can help you find policies for unique risks in hardware and emerging tech.
  
• Compare quotes: Not every insurer understands new risks. Vouch can help you compare policies from multiple companies so you can ensure you’re finding the right carrier for the right price.
  
• Invest in proactive risk management: Implement safety protocols, secure cyber systems, and vet your vendors to reduce your risk profile.

Regardless of how much you pay for insurance, you could end up paying a lot more if you don’t have it. Founders navigating physical product risks, regulatory requirements, and customer contracts need a coverage strategy that scales with their ambition. 

By understanding your risk factors and working with a broker who knows the hardware landscape, you can protect your company without compromising your budget.

Frequently Asked Questions

Q: What types of insurance do hardware startups need most?‍

A: At a minimum: General Liability, Product Liability, Cyber, Tech E&O (if bundled with software), D&O, and Property. Inland Marine or Cargo and EPLI are also common needs.

Q: Why is product liability so important for hardware companies?‍

A: Physical products can cause bodily harm or property damage. Even if your product is safe, you can still be sued. Product liability coverage protects against these scenarios.

Q: What drives D&O insurance costs?‍

A: Capital raised, board structure, financial runway, and legal exposure all influence D&O pricing. As hardware startups attract more investment, D&O becomes both more essential and more complex.

Q: How can companies keep costs down?‍

A: Maintain clean financials, invest in safety and cyber hygiene, and work with a carrier that understands your business model.

This content is for informational purposes only and does not constitute an offer of insurance. Coverage is subject to underwriting, availability, and the terms, conditions, and exclusions of the applicable policy. Not all products are available in all jurisdictions. Please contact Vouch for more information.

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Vouch Specialty Insurance Services, LLC (CA - 6004944 - vouch.us/legal/licenses)

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