Launching your own startup is no doubt exciting; you’re going out on a limb and showing the world what you do best. But it can also be overwhelming.
Between hiring your team, pitching to clients and creating the ideal office environment, it’s easy to think of business insurance as something that can wait until you’re up and running, although this couldn’t be further from the truth.
Not only can business insurance (also commonly referred to as ‘commercial insurance’) protect you from a range of potential startup killers, many clients will not work with an uninsured company, meaning your coverage is critical in ensuring you never miss a sales opportunity.
There’s a raft of business insurance options available which can be tailored for your specific needs. Let’s review five of the biggest reasons business insurance is important for any startup.
1. To protect your property.
Whether you lease or own the property you’re using to run your startup, you’ll want it insured against damage from fire and theft.
Property insurance can cover things like any expensive signage you may have invested in, furniture and white goods you purchased for your staff, and of course, the expensive equipment any start-up needs to get off the ground. (1)
If you live in areas prone to flooding or other natural disasters, make sure you check the fine print. Some insurers will not pay-out in the event of an act of god; shop around to find the right insurance for you.
2. To protect against natural disasters.
If your startup is located in an area prone to flooding, hurricanes or other natural disasters, your property insurance may not cover these events.
Business interruption insurance is an optional coverage option usually presented as an ‘add on’ to an existing policy. It’s designed to protect the policy holder in the event of natural disasters and other unexpected occurrences. (2)
Some line items that may be covered by a business interruption insurance policy are:
- Lost profits in the event your startup is unable to operate.
- The cost of relocating your startup to a temporary location.
- Employee wages during an unavoidable business shut down.
- The cost of training for any new equipment purchased as a result of the disaster. (2)
In the age of COVID-19, it’s more important than ever to thoroughly understand what your business insurance covers you for. Some small businesses in 2020 discovered this the hard way when their insurance companies advised they did not cover virus-related disasters, leaving them in a tough position.
Make sure you read your policy in its entirety before signing on, and get any assurances from your insurance provider in writing.
3. To protect you from lawsuits.
If there is one type of insurance you must have, it’s public liability insurance.
Public liability insurance covers your company and its assets in the event of any losses incurred relating to members of the public, or other third parties. (3)
In a startup environment, you may have a high amount of third-party traffic on your premises in the form of caterers, delivery personnel or potential customers. Without the relevant coverage, if any of those third parties are injured or exposed to harm on your property, you are exposing yourself to costly lawsuits and compensation pay-outs. (3)
Should one of these third parties slip and fall, for example, public liability insurance will ensure your start up isn’t out of business before it even begins.
An important point to note regarding public liability insurance, is that is does not cover employees.
4. To protect your employees.
Nobody wants their employees to be injured on the job — particularly in a startup environment where your team is more like a family.
If the worst should happen and an employee becomes seriously injured in a workplace incident, you’ll want to make sure you’re able to provide the best in medical and rehabilitation care, as required by US law. (4)
Workers compensation insurance is available to cover these expenses, and may also cover the employee’s lost wages, allowing you to focus on your business — safe in the knowledge that your team member is being taken care of.
5. To protect your fleet.
Vehicle insurance is an often-overlooked component of coverage for startups.
It’s extremely common for start-ups to manage all their operations in-house initially, which could mean your employees are using company vehicles to action deliveries, attend meetings or perform other work-related tasks.
If your startup has any vehicles that are driven by employees, you’ll want to make sure you have the appropriate vehicle insurance as dictated by your circumstances and the minimum car insurance guidelines for your state. (5)
An uninsured driver damaging a company vehicle can result in the startup paying out of pocket for repairs (or a replacement vehicle), as well as for any third-party damages. (5)
If your startup is not in a positive cash flow position, you may be unable to repair or replace the vehicle, severely limiting your business operations.
Each startup will have unique circumstances and thus different insurance requirements. Ensuring you have the right coverage for your new business will minimize risks and give your company the best chance at flourishing.
- “What To Consider Before Buying Business Insurance”, Source: https://www.insurance.wa.gov/what-consider-buying-business-insurance
- “Business Interruption Insurance”, Source: https://www.investopedia.com/terms/b/business-interruption-insurance.asp
- “How Public Liability Differs From General Liability”, Source: https://www.usrisk.com/2018/05/how-public-liability-insurance-differs-from-general-liability-insurance/
- “Workers Compensation Law & The Remedial Waiver”, Source: https://lawpublications.barry.edu/barrylrev/vol21/iss2/4/
- “Minimum Car Insurance Requirements By State”, Source: https://www.thebalance.com/understanding-minimum-car-insurance-requirements-2645473