In an emergency, the right insurance can save businesses from financial loss in the form of property damage and liability claims. That is why startups should always have a business insurance plan to help them make payments against legal liabilities and claims against their company.
Still, many small businesses do not have the necessary insurance to safeguard them from these risks. This leaves them and their customers exposed. It can be challenging to find the right business insurance policy because of a lack of previous experience.
Let’s take a look at some important types of insurance and how you can choose the right plan for your business.
Types of small business insurance
The types of insurance you need will vary based on your industry and business size. That being said, some common types of insurance you might need for your business include:
General liability insurance
General liability insurance, also known as errors and omissions insurance, is vital for startups looking to grow. It can be hard to work out the kinks when scaling business operations, but any negligence can raise legal claims against your business.
In this situation, general liability insurance protects a business against legal claims that require huge settlement payments, such as:
- Bodily injury to employees or customers
- Owner and employee life insurance payouts
- Third-party property damage
Business owners leasing a property or operating from a personally owned location must insure their property. Property insurance also covers:
- Company Owned Equipment
If any of these assets get damaged in theft, fire, or natural disaster, the insurance covers the damage costs so business owners don’t have to pay for the resulting destruction. If your property insurance does not cover natural disasters, ask your insurance company to upgrade the insurance package. Not having this insurance can be costly and may even shut down your startup.
Product liability insurance
We know you invest heavily in product quality as a startup, but sometimes products can still malfunction despite going through a necessary quality check. Therefore, it is better to take product liability insurance. If the product malfunctions or doesn’t perform according to user expectations, they might press charges and sue the company, especially if the malfunction results in injury.
If the business has a policy of issuing vehicles to employees, those also need to be insured as soon as possible. The policy will protect the company against liability if an accident occurs and help pay for the damage. Keep in mind that some insurance companies do not cover third-party injuries. In that case, companies should use advanced plans that cover injuries along with vehicle damage.
Business interruption insurance
Every business owner starts their organization thinking about a bright future ahead. However, studies show that almost 22% of startups do not make it past the first year.
So, it is better to be prepared for a catastrophe than to be caught unaware. Unfortunately, if your startup fails for some reason, business interruption insurance will protect the company from lost income. It will also prevent outside parties from issuing a lawsuit against you if you cannot complete assigned projects.
Workers compensation insurance
Workers’ compensation insurance will provide you with resources to offer your employees multiple benefits such as medical treatments and disability allowances. Even if you think your work environment is perfectly safe and your employees have no danger of injury, accidents can still happen. In case there’s a workplace accident and employees are severely injured, they can sue for malpractice. Remember, if you take care of employees well-being, they will stay longer and work harder.
Cyber liability insurance
Cyber attacks and data breaches are among the most common threats every organization faces. If you own a company that handles client data, even if you are strictly maintaining PCI Compliance and following other industry-specific regulations, you are still at risk.
If hackers breach your security system and leak your client’s confidential data, your business reputation will be on the line. But cyber liability insurance minimizes the damage if a hacker breaches your data system. They cover:
- Protection against data protection lawsuits
- Compensation costs
- Legal costs
- System rectification costs
- Compensation of financial loss due to system shutdown
Home-based business insurance
Many startups operate on a small level and use the founder’s home as the primary base, at least at first. Particularly during the pandemic, it has become even more important to secure your at-home work environment. Unfortunately, if there is a business-related problem, the home insurance will not cover it. To provide the home-based business with the required safety net, startups should sign up for additional insurance policies.
Important factors to consider when choosing an insurance company
As a startup owner, you might not know the key qualities you must find in an insurance company before availing of their services. Make sure not to make the common mistake of doing it on your own, and seek out advice from those who know the industry. Some important factors to look for include:
You may be tempted to select the insurance company with the best deals. But instead of going for any other insurance company, choose the one that is well-known for its service quality. If you contract a service that skimps on adequate coverage or isn’t known for paying out legitimate claims, you will have to face the repercussions in an emergency.
It would be best if you went for the insurance company that provides you the flexibility of changing your insurance plan as your business grows. As your startup scales, you will have to increase coverage to meet your company’s needs.
3. Business requirements
Insurance companies offer multiple types of business insurance policies across different industries, so you need to check which approach is better for your organization before choosing a plan. The insurance plan must cover all the specific requirements of your business and meet industry regulations.
4. Trustworthy agent
A good insurance agent or broker is invested in protecting your business. With their guidance, you have a higher chance of finding and obtaining a good insurance plan. Ensure that the investment agent is a specialist in business insurance so that you can appoint them for the long term.
Business insurance protects your business from calamities and protects from financial loss. Significant financial loss can particularly derail startups because it may shut down your business for good. Finding a good business insurance plan can be challenging, so be sure to consult a business planner to help you select a suitable business insurance plan.