If you have decided to start your own business, you already know how much you have invested in terms of time, effort, and money. Over 50% of today’s startups will fail within the first several years of their activity, and many may fail because of inadequate or improper business insurance coverage the first time a business claim arises.
After all you have invested in your business, you don’t want to lose it over something that may be preventable if you have proper insurance. Business insurance is important for your protection as well as the protection of your assets.
There are numerous types of insurance available, and many address specific liabilities, but there are several that no startup should be without.
1. Liability Insurance
This is the first insurance policy that you should look for. Annual costs, depending on your activity, may run in the hundreds of dollars or in the thousands of dollars. Because general liability claims can easily cost you a cool million, better to get the insurance. A General Liability policy may cover things as varied as:
- Property damage
- Personal injury
- Bodily injury
- Injury of a third party
- Workplace accidents
This type of coverage usually will cover a worker or customer slipping on your pavement to falling items that injure people.
If your company owns vehicles of any kind, make sure that you are covered by finding out the difference between general liability and auto liability, and if your vehicles are included in company property damage or not. This is an important general policy because accidents do happen.
2. Professional Liability
Professional liability policies will address what is known as “Errors and Omission”. This kind of policy protects you from claims of negligence, malpractice, and errors committed in your business activities. E&O insurance protects startups both financially and legally against claims of abuse and negligence.
3. Product Liability
If your startup sells, manufactures, or distributes any type of product, you need this insurance policy. Should a product prove to be defective, this kind of policy will defend you against financial losses.
This becomes even more important if the product harms a consumer or if you are obliged to do a product recall that can cost tens of thousands of dollars. This can be vital insurance for restaurants and bars serving foods and beverages.
4. Commercial Property Liability
This type of policy may cover a myriad of risks, from lost income to buildings, equipment, and business interruption. It may also include cash and documents if lost. Also, consider what you need this policy to cover such as damage due to flooding, fire, smoke, extreme weather events, workplace accidents, or vandalism.
5. Workers’ Compensation
This is a must-have insurance policy. Many states will require businesses to have this policy. Should your employee have an accident or be injured, this policy guarantees a standard wage that is taxable to compensate the injured employee. A legal case against your new business will cost tens of thousands of dollars on the average.
These policies also cover medical expenses, wages, and benefits. These are not expenses you want to cover personally. You don’t want to be without it and know that if you are you may be fined.
6. Life Insurance
Hopefully your company will last through future generations and well past your own passing. You will need to protect your family and your interests when you are no longer here.
Commonly referred to as “key man insurance”, this type of policy guarantees a fixed payout to your company and/or your family when you are no longer among us. This is so very important in the event of an untimely demise.
7. Unemployment Insurance
If you need to downsize your business due to a downturn, or an untoward event like a pandemic, you may have to let go of some of your employees.
If you have not stipulated unemployment insurance, you may have to pay unemployment costs out of pocket or be forced to sell assets to do so. This type of policy will aid you in covering these costs until you are no longer financially responsible.
8. Directors and Officers Insurance
This insurance specifically protects a company from legal claims made by officials or officers of the company, and which may damage business operations or profits.
Should one of your directors provide a service or opinion that is not deemed satisfactory, or behave unprofessionally with a client, your company will answer to any legal claims made. A “D&O” policy will protect you if you lose an important company officer.
9. Business Income Liability
Business startups are more often than not, gambles and a high percentage of startups fail. Should you lose business income if operations are interrupted, this kind of insurance will enable you to cover expenses like payroll or rent if you have no incoming money.
10. Home-Based Business Liability
Forbes reports that more than 50% of small startup businesses are based in homes. Homeowners insurance, however, will not cover the business losses.
This is a great option that is specifically designed for business owners running their activities from their home. If you stipulate this type of insurance policy, make sure it covers all liabilities and property damage that might be associated with your business.
Depending on the nature of your startup, you’ll need to determine what kinds of insurance policies are necessary to preclude financial risks and losses. Decide what you require and look for a trusted insurance provider to assess exactly what your risks are, and the type of coverage you need to protect your business, your family, and yourself.