Startup founders have a lot on their plate, starting from the legalities of establishing their business to preparing their business products and services to marketing initiatives and attracting customers.
However, there’s one important step in establishing a successful startup: getting insured. If you’re new to running a business, here’s a quick guide on startup insurance for first-time founders and entrepreneurs:
Startup Insurance: 7 Coverages You Need
Every startup is different. Thus, the type of startup insurance coverage may differ from one company to another. Also, the more your startup grows, the more comprehensive (but nuanced) these insurance programs become.
Fortunately, there are useful apps and software available like Afirmo that can help startups start right with insurance. To learn more about this app, check their website at https://www.afirmo.com/nz/ or other similar sites and apps. That said, here are the recommended coverages you will need.
General Liability Insurance
This type of insurance is a great catch-all policy to cover things like property damage, accidents and injuries on your premises, and non-physical personal injury.
Within those categories, general liability insurance covers the medical, repair, and legal costs. It covers not only you and your employees, but also your vendors, customers, and clients, making it a must-have for startups.
Professional Liability Insurance
Also known as malpractice insurance or errors and omissions insurance, professional liability insurance is required in some industries for a business to operate. It is often associated with businesses that employ lawyers, doctors, and those working in industries like IT, accounting, software development, and real estate. If you’re a service-based startup, you will benefit from this coverage.
Commercial Property Insurance
If you have a physical office, then property insurance is another must-have for your startup. Property insurance covers your startup’s physical assets including building office, furniture, equipment, and inventory.
With property insurance, your business property is covered from damages caused by fire, weather-related disasters like hail storms or typhoons, and well as vandalism.
Workers’ Compensation Insurance
Hiring workers for your startup will require you to get workers’ compensation insurance or workers’ comp.
This type of insurance covers your business for medical treatments, disabilities and death benefits in case one of your employees is injured or dies as a result of working for your startup business.
It ensures that injured workers get the compensation and care they need, as well as protects you against lawsuits by injured workers.
Product Liability Insurance
Similar to professional liability insurance, product liability insurance is for the startups selling products. It covers any legal costs, medical costs, or repair bills when your products have caused harm.
Cyber Liability Insurance
In today’s business world, cyber liability insurance has become a necessity for startups. As companies rely more on technology to manage and run their business, there’s also a significantly increased risk of cyber-related damages.
Cyber liability insurance covers financial loss from cyber-attacks, data loss, and disruptions caused by hacking and other kinds of cybercrime. It can also help get your business back up and running sooner than later because you will have resources available to spend on getting operations back to normal.
Business Owner’s Policy
In general, a business owner’s policy or BOP encompasses a few of the insurance types listed above. Think of it as a package option that could help you save money instead of getting coverage for each policy separately.
Typical BOP insurance will include general liability, business interruption, and commercial property insurance. Some providers can offer more, but with a higher premium.
Tips For Buying Startup Insurance
Assess Your Risks
First off, you need to determine the type of coverage your business needs. While we recommend that you get most of the insurance options we mentioned above, your budget may not be able to cope with the premiums if you get them all in one go. That said, it’s important that you list the most important coverage you need and get the others later on as your company grows.
Depending on the type of coverage you want, there are many insurance providers you can choose from. Make sure to do your homework properly: compare rates, read reviews and get opinions from other small business owners on their insurance providers. Contacting multiple insurance companies makes it easier to see which options offer more suitable coverage for your business given your current budget and needs.
Over time, your startup’s needs will change. This is why, you need to re-assess your coverage regularly and determine if you need to switch providers, add more coverage, or get a different type of insurance policy based on how your business moves.
Startup insurance may not be on top of your mind with all the moving parts your newly-established business may be dealing with. However, it is one of the most important investments in your company’s early growth plans, protecting your startup in the long run.
Startup Insurance: A Guide For Founders