Business Insurance for Startups
So you’ve finally done it! You started your own company. You’ve dissected your markets and know what demographics to target, researched how your product or service should perform, obtained necessary capital, networked with important providers and potential partners and clients, researched your IT needs and purchased the needed equipment. You’re ready, but it seems like you’re forgetting something. Insurance! Depending on what type of business you’re starting, you may not even be able to get a contract without the right type of insurance in place. To help expedite this process, here are some of my top coverages a startup should have.
This one’s pretty simple. If you cause bodily injury or property damage you need general liability insurance to help pay for the damages and potential legal fees associated with that claim. Every business from a personal assistant to a fortune 500 construction company should have general liability. Depending on what you do, it could be relatively inexpensive too, just a few hundred dollars a year. I recommend not entertaining offers under $1,000,000 per occurrence, or, per claim.
Products and Completed Operations Liability
This should be tied in with your general liability. It should be a little higher than your general liability, typically about double. Products and completed operations insurance helps protect you once you’re done with a job or a product leaves your store. For example, a sign you installed last week came loose from a building hitting someone in the head. This would typically be excluded under your general liability but covered under your completed operations liability. Make sure you see this on your policy.
Hired and Non-Owned Auto
Even if your business doesn’t own a car, you need this coverage. If you ask your good friend to come help with a project and while driving to meet you they cause an accident, most lawyers would say they were working for you and not only sue your friend but sue your company as well. Hired and non-owned protects your business in the event someone causes an accident while working for you.
Your homeowner’s policy excludes business property. So even if your startup is in your garage, you may want to buy some property coverage to ensure you have the right type of protection. A major difference between your homeowner’s policy and business policy is where the property is covered. Your homeowner’s policy covers your belongings anywhere in the world. Your business policy only covers them up to 1,000 feet from your address. So, if you plan to take your equipment or property with you to jobs, you’ll need a special type of property coverage called an Inland Marine policy. Make sure you know how you’ll use your property to help ensure it’s protected.
This is, unfortunately, becoming more and more of an issue for business owners. If you send emails, have a website, or really do anything related to the internet, you have some exposure for a cyber loss. Cyber insurance is intended to protect you from all types of cyber/internet threats. If you keep other people’s information which is then stolen, this can help protect you and your clients. It also helps if malware is downloaded onto your computer or cyber extortion happens. A big issue I’ve seen a lot of is social engineering. One of the partners in a startup or even a well-established business gets an urgent email from someone saying they need them to wire $10,000 to start a contract that will help the business. It’s only after they wire the money that they find out the email was fake and they just gave away 10 grand.
This one is a little tricky. If you’re the sole owner/member of an LLC, you don’t necessarily need this. However, if you have employees, you legally need to carry workers comp. However, many startups only hire contractors which could negate the necessity for workers comp. But sometimes those contractors, by how they engage with the business, are really employees and need workers comp. If you classify a person wrong, it could have devastating ramifications. So carrying work comp when you’re legally required to is key to protecting not only your employees but your business.
If you have just started a business, or have been in business for many years, give me a call to help review or start your coverages.