Becoming a business owner is an exciting endeavor for many Americans. It offers opportunities to be your own boss, share your knowledge and help others succeed and grow. However, it also comes with countless risks that might be overwhelming, especially for new entrepreneurs.
Providing adequate insurance is crucial to protecting your business from financial burdens resembling legal fees, repairs and medical expenses. This quick guide will guide you thru the basic insurance policies your startup company should consider to guard itself and keep things running easily.
The importance of insurance for startups
Insurance is essential for startups for several reasons, many of which are obvious. First of all, running a business is often required by law. Many contracts and leases may require specific insurance, making fulfilling contractual obligations essential.
Additionally, insurance protects your business against catastrophic losses that may lead to its closure, no matter what stage of your business life you are in. Beyond the financial protection aspect, having the right insurance may enable you gain customer trust and attract top talent, increasing the credibility of your new enterprise.
Finally, not all business risks and insurance are the same. Several variables are used to find out premiums, resembling location, income, risk classification, payroll, and insurance requirements. It is vital to contact a trusted insurance advisor who can review your business risks and provide the appropriate insurance coverage for your business.
Where to start out – essential insurance policies for startups
- General liability insurance this is one of the most simple principles of every company/startup. Covers third party accidents resembling customer injury or property damage, protection against workplace accidents, customer property damage, and product liability lawsuits. This variety of insurance is often required for leases and contracts, making it a key element of a startup’s risk management plan.
- Commercial property insurance is essential if your company has any physical assets. Covers damage, destruction or theft of business property, including weather events, fires and theft of kit. Whether you run your business from a home office or rented space, this policy gives you peace of mind that your company’s assets and investments are protected.
- Business Owner Policy (BOP) combines civil liability insurance and business property insurance in one package. This combined insurance is often cheaper and provides comprehensive coverage beyond just liability and business property insurance. BOP may include business interruption insurance, which covers lost income attributable to natural disasters, ensuring your business recovers quickly from unexpected setbacks.
- Professional liability insurancealso referred to as errors and omissions (E&O) insurance, it is especially vital for consultants, advisors and skilled service providers. Protects against lawsuits related to errors and omissions at work, resembling accusations of negligence, missed deadlines and other costly mistakes. This policy is essential for any company offering skilled advice and services.
- Cyber liability insurance is becoming increasingly vital as the variety of digital threats, hacks and ransomware increases. It helps corporations get better financially from data breaches and cyberattacks by covering costs resembling data breach notification, investigations, and public relations efforts to mitigate reputational damage. There are two types of cyber liability insurance available: first party, which covers data breaches inside your company, and third party, which covers breaches on your client’s servers.
- Do you intend to rent employees and when? Employee insurance is a must. This policy covers work-related medical and disability expenses while protecting against lawsuits resulting from worker injuries. Workers’ compensation insurance is legally required in most states for businesses with employees, but it also provides helpful protection for sole proprietors.
- Commercial automotive insurance is also essential for corporations using vehicles for business purposes. Covers automotive accidents involving company-owned vehicles, including injuries, property damage, theft or vandalism. With this policy, your business operations will give you the option to proceed without interruption even in the event of an accident.
- Apprenticeship Liability Insurance (EPLI) helps cover legal costs if an worker sues your startup, for example for discrimination, harassment or wrongful termination, simply to name a few. Ultimately, the sort of policy protects against wrongful termination claims, discrimination lawsuits and other violations of worker rights, providing a safety net for your business in the increasingly contentious environment in which we operate.
- At last, directors and officers (D&O) insurance. covers lawsuits related to decisions made by executives and board members (which can or may not apply depending on the organizational structure of your startup). This policy protects against issues resembling lack of transparency, mismanagement of funds and non-compliance, giving your management team the confidence to make decisions without fear of non-public liability.
Key steps to take when insuring yourself
Here’s a quick cheat sheet with the obligatory steps to effectively protect your startup:
Assess your risk: Identify your startup’s specific risks based on industry, location and business model.
- Consult your insurance agent: Work with a knowledgeable agent who can guide you thru the forms of insurance most appropriate for your business (don’t overpay for something you do not need, and conversely, do not be underinsured for something you do).
- Compare quotes: Get quotes from multiple insurers to make sure you get the best cover at a competitive price (it is often best to buy around).
- Review policy details: Read the terms and exclusions of each policy (if you do not understand something, ask questions or, higher yet, work with an agent who can enable you).
- Package rules: Consider combining multiple policies inside a BOP for potential savings.
- Review and update your insurance coverage commonly: As your business grows, be sure you commonly re-evaluate your insurance needs to make sure continued protection.
Application
Starting a startup is exciting, but it carries significant risk for small business owners. Protecting your new business with the right insurance policies is essential to mitigate these risks and ensure long-term success. By understanding the several types of insurance available and taking proactive steps to make sure comprehensive coverage, you may focus back on what you like doing while knowing you have peace of mind.
The right insurance meets legal and contractual requirements and provides financial protection and credibility to assist your startup thrive.
Jerry Palmaioli is the associate director of e-commerce sales On Insurance.