Nowadays, a lot of people decide to become entrepreneurs and launch their own startup businesses. After all, the appeal of being your own boss is difficult to neglect. But, starting a business is no easy task - to put it mildly.
From raising capital to developing a business and marketing plans all the way to financial projections and tons of other tasks, you still have insurances to worry about. Yes, business insurance is something that’s commonly overlooked by new business owners until the moment comes that they actually need one or two.
And yes, entrepreneurs try to save every penny that they can for business growth and development but one lawsuit at the wrong place and the wrong time can send you straight to bankruptcy in a blink of an eye.
Therefore, better safe than sorry as they say. With that in mind, here are some types of business insurance you may need if you’re planning on launching your own startup business.
Business Liability Insurance
Also known as General Liability insurance this policy is the mother of all insurances for businesses of any type. This is especially true if you plan on selling any products or services to clients or customers.
The main reason is that someone can easily have a claim made against you provided your employees, products, or services caused or allegedly caused property or bodily damage to a client or customer.
For example, someone’s kid swallows a small piece that broke off from your product but there was no choking hazard warning label on it and voila, you find yourself in court.
Business liability insurance protects both companies and their owners from such claims, especially since such claims cost an arm and a leg to combat in court. Without this insurance policy, all legal fees and fines go out of your own pocket.
Workers Compensation Insurance
In most cases, startup owners don’t hire employees right away in order to cut down on operational costs. However, sooner or later, you won’t be able to handle all the business tasks by yourself.
The moment you hire your first full-time employee you should also get workers' compensation insurance. This insurance policy covers employee safety at work and on the way to work, as well as vice versa.
In the event that something bad happens to one of your employees while they are at the office or out doing fieldwork, they have the right to sue you and your company for compensation, of course.
But with workers' compensation insurance, employees get coverage for pretty much everything ranging from medical bills and lost salaries while recovering and even their families get compensated in case of death.
This may sound grim to even consider but some jobs are more dangerous than others and anything can happen. That being said, in exchange for compensation, employees forfeit their right to sue the company or the owner if an incident should occur.
Data Breach Insurance
Since most businesses today operate online or at least have an online presence, the threat of cyber attacks is very much real. That said, small businesses and startups are the most common targets for cyber criminals and 60% of small companies that fell victim to a data breach never recover from it.
After all, SMBs and startups don’t have as sophisticated security measures as corporations do so they’re easy prey for hackers. Therefore, data breach insurance is only logical if you plan on operating online, which you probably do.
As its name suggests, data breach insurance covers everything in the event of a data breach fallout. Here are some of the things that are covered under the policy.
- Protection from ransomware
- Practical support, such as legal advice, forensics, notifications to clients and customers, consumer data monitoring and so on.
- Compensation for the loss of income
- Reputation management and disaster recovery
The fact of the matter is that a data breach is most likely to occur sooner or later. It’s just a sign of the times we live in. That’s why data breach insurance is an absolute must for businesses that operate online in any way.
Renting out an office space is a costly endeavor for startup businesses. However, you’ll eventually need an office to house employees and ensure proper collaboration and cooperation among them.
Whether you lease or purchase property for a business office, you should strongly consider getting property insurance. As you may already know, accidents tend to happen when you least expect them to and at the most inconvenient of times. A pipe bursts and floods your office or a local wildfire changes directions suddenly and heads straight for your office building.
There’s also vandalism and theft as office spaces are, indeed, great targets with potentially great loot to steal or thrash around. That’s why property insurance is a must provided you have a property that needs to be insured.
This insurance policy protects your premises for natural disasters, damage to inventory, loss of business income if you can no longer operate from the location, costs of replacing damaged furniture and equipment and so on.
Errors and Omissions
Errors and Omissions (E&O) insurance policy is very similar to general liability insurance but it’s more focused on businesses that provide certain services to clients like legal advice, medical care, consulting, life coaching, and so on.
Clients can always claim that ill fate befell them as the result of your advice or that their condition got worse as the result of your treatment. And, as you might imagine, they’ll file a lawsuit against you and your agency or practice.
In that case, the E&O insurance policy will cover legal fees, costs, and any compensations you must pay in case you’re found guilty of malpractice. As mentioned before, better safe than sorry as any costs of lawsuits made against you will go out of your own pocket if you’re not properly insured.
Insurances may seem like not so much of a priority to startup owners compared to other tasks. However, ignoring something seemingly trivial like business insurance can halt your business growth and development or even ruin it altogether if you’re not careful enough. Therefore, consider which business insurance your startup needs and obtain them before you end up regretting not doing so.