From the beginnings of any startup, there is always exposure to risk no matter what industry you’re in. Even before you hire your first employee, your business can be liable without the right insurance plan in place. Startups are in special need of protection from lawsuits because just one catastrophic event could be more than enough to put a business in the early stage out of business.
Thankfully, entrepreneurs have access to a wide variety of business insurance that will help protect them from any potential danger. In this article, we are going to cover the different types of business insurance that every startup should have in place.
Professional liability insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, is necessary to help protect your business from negligence claims that come as a result of mistakes and/or failure to perform.
Since every industry has its own insurance concerns, your professional liability insurance policy will likely be customized to be specific to your niche, so you will want to read through your policy to find out what you are and are not protected from.
If your startup owns its own workspace or leases the property, property insurance is a must. Property insurance will cover things like:
- Company Owned Equipment
- Property Damage
With property insurance, your business will be covered if any of these areas are damaged due to fire, theft or natural disasters. If your property insurance policy doesn’t cover mass destruction events such as flooding and earthquakes, and your area is prone to these types of storms, then you may want to ask your insurance agency about how your place of business can be covered.
Workers compensation insurance
As soon as your business has hired its first employee, you’ll want to get insured for workers compensation, which will cover your business for medical treatments, disability and death benefits in the case that one of your employees is injured or dies as a result of working for your business.
While your business may do everything possible to follow safety guidelines, accidents do happen, and you’ll want to be covered in the event that something happens.
Many successful businesses were once startups that operated out of someone’s home. Unfortunately, homeowner insurance policies don’t cover your home-based business in the way that commercial insurance policies would.
The solution to this common problem is simply pulling out additional insurance. However, the additional insurance policy is not a one size fits all plan, so you will have to talk with your insurance agency about what can and cannot be covered through additional insurance depending on your needs.
Product liability insurance
If your startup manufactures products for sale to the general public, then product liability insurance is essential for your business. Even though you might take every precaution to make sure that your products are safe and user-friendly, you might still find yourself up against a lawsuit from damages caused by your products and in that case, you will want to be protected.
Product liability insurance will work to make sure that your business is protected in the case of a lawsuit, and with each product liability policy, you can tailor the amount of money you are insured for in the case of a lawsuit.
If you or any of your employees use a vehicle for company purposes, then vehicle insurance should be added to your list of insurance policies. Vehicle insurance will help to protect your company against liability should an accident happen and you or your employees are found to be at fault.
While some basic vehicle insurance policies may only cover third party injuries, you can get more advanced plans that will cover injuries and liability for damages.
Business interruption insurance
While no business ever hopes to have their operations interrupted due to a disaster or catastrophic event, this can still happen unexpectedly. This insurance policy will protect your company from lost income if one of these disasters occur and prevent your company from being able to work in your office, manufacture products or make sales calls.
Business interruption insurance can even protect you from potential lawsuits due to your inability to complete work, which could save your business a huge financial loss.
Hopefully, this guide will help your startup to know how to protect itself with the right insurance policies in place. By making sure that you have the right insurance policies in place, you will be able to avoid some potential financial losses during the critical starting stages of your company.
Keep in mind that every insurance agency has its own policies, so you should double check with your representative to make sure that you and your business are protected.