Insurance provides protection from unexpected financial loss that could quickly drain a startup’s resources, such as lawsuits, property damage claims or natural disasters.
To determine what coverages are necessary for your startup, consult an experienced insurance advisor. Bundling policies can save costs. Here are the top ten business insurance policies every startup should consider: 1. General Liability Coverage.
1. General Liability Insurance
General liability insurance protects startups against financial loss caused by various common risks, including bodily injury or property damage that occurs at their business, claims related to company advertising, as well as claims for libel or slander related to company activities. Usually bundled together with commercial property and business interruption policies into one Business Owner’s Policy (BOP), purchasing this coverage individually would likely incur greater expense.
Other policies startups may require include hired and non-owned auto coverage that protects both employees and the business in case of vehicle accidents; crime insurance that reimburses clients whose money was stolen by workers; and employment practices liability coverage that covers legal fees should an employee file an employment discrimination or harassment suit against an employer.
2. Business Owner’s Policy (BOP)
If your business qualifies, a BOP can protect against property and liability risks unique to its industry. It often bundles commercial property insurance and general liability coverage under one convenient policy.
General liability covers you against claims by third-parties (such as customers or competitors) which arise during the course of business operations, covering legal costs and settlements up to an agreed upon limit. Commercial property insurance covers your physical assets including your building, equipment, inventory, supplies as well as lost income should something unexpected force a halt of operations temporarily.
3. Property Insurance
Business property insurance should be one of the primary concerns of startup businesses. It protects against catastrophic events such as fire, theft or natural disasters that may cripple their operations and put their livelihood at risk.
An appropriate business insurance policy will protect your startup against third-party lawsuits, damage to physical assets and revenue loss caused by unexpected incidents. Furthermore, having such coverage demonstrates your company is serious about mitigating risks.
Your coverage requirements depend on your industry, size and location of your business. Some insurers provide bundles to save both time and money, such as Business Owner’s Policies (BOPs) that combine general liability, commercial property and business interruption insurance in one package.
4. Errors and Omissions (E&O) Insurance
Errors and Omissions Insurance (also referred to as professional liability) is an essential policy for businesses that offer advice or services for a fee. E&O helps cover legal fees, settlements and judgments due to errors or omissions occurring during your business activities.
An E&O insurance policy could save your small company from financial ruin in the event of a lawsuit, particularly one with significant legal expenses or lost earnings. Even honest mistakes like missed deadlines or misguided advice could lead to costly litigation proceedings.
5. Directors and Officers (D&O) Insurance
Directors and officers (D&O) insurance provides your management team with essential protection against claims of mismanagement or misfeasance, both false and otherwise. In defending these lawsuits, legal expenses quickly pile up; protecting yourselves can save both money and stress in the process.
Startups by their nature tend to be more flexible and risk-taking than conventional large businesses, which means decision makers may act quickly without properly considering potential risks – increasing the chances of D&O claims against startups.
Investors typically require D&O insurance as part of a funding agreement to mitigate risk. D&O coverage is also essential for private and not-for-profit companies that face legal responsibilities and risks.
6. Cyber Insurance
Digital transformation of business operations offers great potential to engage customers and drive sales, but also presents risks that traditional insurance policies cannot fully address. Insurance providers have several policy options to help startups reduce cyber risk.
Cyber liability insurance provides businesses with protection from the costs associated with data breaches that involve sensitive information like Social Security numbers, credit card numbers and account numbers. It also covers expenses related to identity fraud, credit monitoring and computer forensics.
This type of insurance typically comes as part of a BOP package and provides per-occurrence and aggregate limits between $1 million to $5 million, as well as business interruption coverage and regulatory fine assistance.
7. Employment Practices Liability Insurance (EPLI)
As today’s professional environment is highly charged with politics, any company may find itself exposed to employment practices lawsuits from employees alleging wage theft, sex discrimination or unfair termination by their employers. Your company could face costly litigation should an employee believe your employer violated its own policies by firing them for speaking out about issues like wage theft, discrimination or termination if this action took place against them.
EPLI provides financial protection from costly employment-related lawsuits that could otherwise compromise your startup. It may be added onto an existing Business Owner’s Policy (BOP) or purchased as a standalone policy; an insurance agent can help assess risk and select one that aligns with your needs.
8. Directors and Officers (D&O) Liability Insurance
Startup companies rely on their board members and executives to make strategic decisions that will enable the business to thrive, yet if their decisions lead to financial loss or breaches in regulatory obligations, a lawsuit could be filed against either their organization or leaders.
D&O insurance protects directors and officers against financial risks and legal liabilities associated with their managerial responsibilities, mitigating legal fees, settlement costs and judgments so they can focus on running their businesses instead. Offering D&O coverage allows startups to attract and retain senior personnel more easily.
9. Cyber Liability Insurance
An emerging startup’s journey can be fraught with financial and operational hiccups that threaten sales and reputation. Business insurance offers peace of mind to investors and employees by helping mitigate risks and protect investments and reputation.
Cyber liability insurance protects against costs associated with data breaches and cyberattacks, providing financial coverage should any of your customer data become compromised or be stolen by malicious actors. Any organization handling sensitive customer data should consider taking out such coverage – healthcare providers especially who deal with patient records should take note!
Property insurance covers your office building, equipment and inventory from damage caused by theft or severe weather events. Many startups find combining both types of coverage into one policy more cost-effective.
