5 Questions to Ask Your Insurer About AI Risk

AI is entering every industry, but most insurance policies weren't written with large language models in mind. Here are five practical questions you can ask your insurer today to understand your coverage.

1. Does my policy explicitly cover AI incidents?

Many cyber and liability policies are written around traditional risks: hacks, lost laptops, data breaches. If the word "AI" or "machine learning" never appears, coverage may be unclear. Ask directly if AI-caused errors, misuse, or failures would qualify as covered events.

2. How are hallucination-caused harms treated?

Large language models can "hallucinate" — producing confident but false information. If that error leads to financial loss or harm (for example, a chatbot giving incorrect instructions), does the policy respond? Some insurers may classify it as an excluded professional error.

3. What about bias and discrimination claims?

AI hiring tools, lending models, or healthcare assistants can unintentionally discriminate. These claims often fall under employment practices liability insurance (EPLI) or other specialized policies, not cyber liability. Clarify whether your insurer treats AI-driven discrimination like traditional cases. For specific examples, see our guides on AI hiring risks and finance compliance concerns.

4. How are third-party AI vendors handled?

If your company relies on external AI tools, a failure or leak at the vendor could impact you. Some insurers only cover incidents in systems you directly control. Ask if coverage extends to subcontractors, vendors, or cloud-hosted AI models. Our cyber vs. AI liability guide explains these coverage gaps in detail.

5. Are AI-specific endorsements available?

The insurance market is beginning to experiment with AI-focused endorsements and add-ons. Even if your base policy is vague, an endorsement may tighten definitions and provide certainty. It's worth asking what's available now and what's coming soon.

Takeaway: Every insurer is still figuring out AI coverage. By asking clear, plain-language questions, you can spot coverage gaps and avoid surprises. Always confirm answers in writing, and when in doubt, consult a licensed professional.