In an emergency, the right insurance can protect a company from financial loss due to property damage and liability claims. That is why startups should always have a business insurance plan in place to help them pay for legal liabilities and claims made against their company.
Nonetheless, many small businesses lack the necessary insurance to protect themselves from these risks. This exposes them and their customers. Because of a lack of prior experience, it can be difficult to find the right business insurance policy.
Let’s look at some of the most important types of insurance and how to choose the best plan for your company.
Small business insurance policies come in a variety of forms
The types of insurance you require will depend on your industry and the size of your business. Having said that, some common types of insurance you may require for your business include:
Insurance against general liability
General liability insurance, also known as errors and omissions insurance, is essential for growing startups. When scaling business operations, it can be difficult to iron out the kinks, but any negligence can result in legal claims against your company.
In this case, general liability insurance protects a company from legal claims requiring large settlement payments, such as:
- Employee or customer bodily harm
- Payouts on owner and employee life insurance
- Damage to third-party property
Property protection insurance
Business owners who lease a property or operate from a personal residence must insure their assets. Property insurance also includes coverage for:
Inventory of Company-Owned Equipment Furniture
If any of these assets are damaged as a result of theft, fire, or natural disaster, the insurance will cover the costs so that business owners will not have to pay for the resulting destruction. If your property insurance does not cover natural disasters, contact your insurance company and request an upgrade. Failure to obtain this insurance can be costly and may even result in the closure of your business.
Insurance for product liability
We understand that as a startup, you place a high value on product quality, but products can still malfunction despite passing the necessary quality checks. As a result, it is preferable to obtain product liability insurance. If the product malfunctions or fails to perform as expected by the user, they may file charges and sue the company, especially if the malfunction causes injury.
Insurance for automobiles
If the company has a policy of providing vehicles to employees, those vehicles must be insured as soon as possible. If an accident occurs, the policy will protect the company from liability and help pay for the damage. It is important to note that some insurance companies do not cover third-party injuries. In that case, businesses should implement advanced plans that cover both injuries and vehicle damage.
Insurance for business interruption
Every business owner starts their company with a vision of a bright future. However, studies show that nearly 22% of startups fail within the first year.
As a result, it is preferable to be prepared for a disaster than to be caught off guard. Unfortunately, if your startup fails for any reason, business interruption insurance will cover the loss of income. It will also prevent third parties from suing you if you fail to complete assigned projects.
Insurance for workers’ compensation
Workers’ compensation insurance will provide you with the resources you need to provide your employees with a variety of benefits, such as medical treatment and disability allowances. Accidents can happen even if you believe your workplace is completely safe and your employees are not in any danger. Employees can sue for malpractice if there is a workplace accident and they are seriously injured. Remember that if you care about your employees’ well-being, they will stay longer and work harder for you.
Insurance for cyber liability
Cyber attacks and data breaches are among the most common threats that any organization must contend with. You are still at risk if you own a company that handles client data, even if you strictly adhere to PCI Compliance and other industry-specific regulations.
Your company’s reputation will be jeopardized if hackers breach your security system and leak confidential data from your clients. However, cyber liability insurance mitigates the damage if a hacker compromises your data system. They go over:
- Legal defense against data-protection lawsuits
- Compensation expenses
- Legal fees
- Costs of system correction
- Compensation for financial losses incurred as a result of system downtime
Insurance for a home-based business
Many startups operate on a small scale, with the founder’s home serving as the primary base of operations, at least at first. It has never been more important to secure your at-home work environment, especially during a pandemic. Unfortunately, if a business-related issue arises, home insurance will not cover it. Startups should sign up for additional insurance policies to provide the necessary safety net for their home-based business.
Important considerations when selecting an insurance company
As a startup owner, you may be unaware of the key characteristics you should look for in an insurance company before using its services. Make sure not to make the common mistake of doing it alone, and instead seek advice from those who are familiar with the industry. Some important things to look for are:
1. High quality
You might be tempted to go with the insurance company that offers the best deals. However, rather than going with any other insurance company, go with one that is well-known for its service quality. If you hire a service that skimps on adequate coverage or isn’t known for paying legitimate claims, you’ll have to deal with the consequences in an emergency.
It would be best if you chose an insurance company that allows you to change your insurance plan as your business grows. As your startup grows, you will need to expand your coverage to meet the needs of your business.
3. Organizational requirements
Insurance companies provide various types of business insurance policies across various industries, so you must determine which approach is best for your organization before selecting a plan. The insurance policy must cover all of your company’s specific needs and adhere to industry regulations.
4. Reliable agent
A good insurance agent or broker is invested in the protection of your company. You have a better chance of finding and obtaining a good insurance plan if you follow their advice. Make certain that the investment agent specializes in business insurance so that you can retain them in the long run.
Business insurance protects your company from calamity and financial loss. Significant financial loss, in particular, can derail startups because it may force you to close your doors for good. Finding a good business insurance plan can be difficult, so consult with a business planner to help you choose a suitable business insurance plan.