The different components of insurance for startups
The purpose of business insurance for startups is to safeguard your fledgling business from losses in investment, financial compensation for the employees in case of accidents, and some other specific reasons which we discuss in detail later on. What must be kept in mind throughout the read is that all businesses, especially startups, are inherently different in nature, hence some of the coverage may not apply to your line of business.
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Property Insurance: This insurance ensures that the physical assets and the property that the business occupies are covered against theft, natural and man-made disasters. The coverage extends from buildings, to equipment, computers, furnishings and also existing inventories.
Workers compensation insurance: In most states, it is required for startups to have worker’s compensation insurance in place. This insurance is for workers to bank on when employees are injured in the course of work, and can be viewed at as invisible wages to incapacitated employees for indefinite amounts of time.
Commercial Auto/Flood insurance: the commercial auto insurance policy gives both you as well as your employees, coverage for the vehicles you borrow, lease, rent or own. It is an important insurance for startups, and provides a degree of financial assurance for the people insured. Flood insurance on the other hand, is provided under the umbrella of the National Flood Insurance Program to startups to compensate for the financial losses caused by flooding.
Commercial Umbrella Insurance: Also known as umbrella liability, commercial Umbrella Insurance provides for more protection when your startup is challenged by damaging lawsuits as well as accidents. It might also help in insurance for startups where additional liabilities are left uncovered by other policies.
Professional Liability Insurance: if you are the owner of a startup providing professional services like advisory practices or medical practices, you would need this insurance cover to act as a shield against losses incurred due to legal processes and also defense costs. The prospect of lawsuits arises mainly from errors and omissions in the process of executing professional duties for a startup, and they can be damaging financially if you do not possess insurance.
Management Insurance: This covers your startup from lawsuits that crop up due to unsatisfactory discharge of management duties and practices. You would need the expert help of an insurance professional to determine exactly what levels of coverage your startup will need.
Business Income Insurance: If an unforeseen situation, natural or man-made, prevents your startup from discharging its regular duties and practices, this insurance will help you to pay the employees on your payroll, and other financial obligations like rent, etc.
Now, we move on to one of the most important insurance for startups; Commercial/General liability insurance. We look to answer some of the most frequently asked questions regarding Commercial General Liability Insurance.
1. What is General Liability Insurance Coverage?
This insurance is one that provides your startup with coverage against property damage issues and claims, claims for bodily injury, advertisement injury claims and personal injury claims. Coverage is there for customer injuries, lawsuits and damage to another person’s property. And if any particular incident is followed by a lawsuit, the commercial general liability Insurance will step in to pay for medical bills and legal proceedings as well.
2. What falls under the cover for Commercial General Liability Insurance?
Here are a few things that Commercial General Liability is good for:
- Injury to the body and damage to the property: the insurance can settle for claims that allege your startup has caused bodily harm or damage to property
- Reputational Harm: It also stands by your side in claims regarding malicious prosecution, wrongful evictions, slander, and libel, violation of rights to privacy and a host of similar situations.
- Errors in Advertising: claims of misleading and false advertising, along with copyright infringement issues are taken care of by Commercial General Liability Insurance.
- Medical costs and payments: If your startup has some unforeseen bad luck and there is someone in the employee ranks or management who needs to access medical care for a period of time, General Liability Insurance comes good, given that the root incident of the malaise lies in the workplace.
- Damage to rented property: If your rented property is damaged by lightning, fire, or even an explosion, General Liability insurance has your startup covered.
3. What is the cost of General Liability Insurance?
Because you are the owner of a startup, the size and strength of the startup will be a decisive factor in determining the policy premium. The factors that are calculated include the kind of business that you do (higher the risk factor, higher the premium), years of experience in the field (more experience generally indicates lower premium), the size, location and also the condition of your startup. Again, policy specific particulars will also affect the premium rate and limit; cost is limited when there is higher coverage while going for higher deductibles will lead to lowering of premium costs.
4. Why is General Liability Insurance so important?
Startup entrepreneurs may ponder on the usefulness of General Liability Insurance; however they should know that this insurance covers a whole range of potentially serious financial issues. Liability claims can arise from very common situations, and they are escalated exponentially till they threaten to put the reputation of the startup in jeopardy. Things like your representatives or employees meeting potential clients, representing the business interests, working on other’s property, or even the usage of applications created by a third party are all in a day’s work for a budding startup. It helps to know that you have solid insurance cover to watch your back.
We live in uncertain times, and a startup mindset naturally accommodates a high percentage of risk taking. It is par for the course, and it helps if the other aspects of the business are watertight, so that the captain can run an organized ship on uncharted waters. Needless to say, a lot of good quality work can be accomplished if there is insurance for startups, especially General Liability Insurance.