For any business owner, one way of ensuring success for your business is by managing risks. More than just a legal requirement, securing an insurance policy plays an important role in terms of risk management as it will mitigate loss and promote financial stability for your company.
This is particularly even more important for startups and small businesses as it keeps your overall operations and employees protected as well as entice potential partners to invest in your growing company. With so many types of insurances out there, picking the best for your business may seem like an overwhelming task. To help you, here are the 7 most important types of insurance that you need to have for your startup.
1. General Liability Insurance
The most basic insurance policy, you have to get for your startup should include general liability coverage. This type of insurance protects you financially from accidents that may occur within the premises of your company. These types of accidents can range from property damage and other types of injuries that a person may attain during their duty. It is important to remember that having a General Liability insurance will not make your startup immune to lawsuits. However, it can provide financial support should you face any legal claim or settlement.
2. Errors and Omissions Insurance
Errors and omissions insurance is particularly important for startups that provide services as products. Having this type of professional liability insurance will protect you from claims filed by your clients against you due to poor service or negligence. Included in the coverage of this type of insurance are settlement costs and legal defense charges. In general, this type of insurance can protect your startup business from claims of misrepresentation, inaccurate advice, libel, slander, and negligence.
3. Business Interruption Insurance
Fires, hurricanes, and other natural disasters are always unexpected events. In case your business ceases to operate due to perils covered by your business interruption insurance policy, you will be protected financially in several ways. Financial advisors highlight the importance of determining your future profits first so you can know the actual extent of business interruption insurance coverage you need. This type of insurance can provide financial protection through repayments of your loans, mortgages, and leases. It can also handle payroll, taxes, and reimbursement for lost income.
4. Business Property Insurance
If you do not want to shell out more than you can afford, you should replace or repair any machinery or furniture, get Business Property insurance. Any type of business requires certain products, tools, and equipment to keep the operation running smoothly. To avoid any damages caused by vandalism, theft, and smoke damage, it is strategic to invest in property insurance. Owning this type of insurance is even more critical if you have your building.
5. Directors and Officers Insurance
If your startup has a board of directors or advisory committee, getting this type of insurance is a good investment. To financially protect your directors or officers of your company from lawsuits, having a Directors and Officers insurance is essential. This type of insurance covers damage and legal defense costs should there be a lawsuit against directors or officers which claims that the management’s actions negatively affect the profitability or the operations of the entire company.
6. Workers Compensation Insurance
Your employees are the backbone of your startup company so you must invest in insurance that will offer them financial protection. Aside from the monetary assistance that this type of insurance provides, it is also an effective way to boost your team’s morale and employee retention. This insurance is composed of salary compensation and medical benefits for your employees who get injured while on the job.
7. Cyber Liability Insurance
In today’s digital age, securing insurance, which has a cyber liability policy is very critical. If you have a computer system that contains sensitive electronic data, there is always a possibility of data breaches and data breaches can be very costly. With Cyber Liability insurance, you will be able to protect your startup from financial losses caused by data breaches and other cyber events. The coverage can range from the cost to replace or restore electronic data, income loss and other charges, cyber extortion, and notification cost.
An insurance policy is an investment for you, your company, and your people. If you want to ensure protection from financial losses across a variety of situations, you need to secure the right type of insurance. As coverage and limits may vary, it is important for you to first review your insurance policy to make sure that they meet your overall business needs.
