Have you recently started a business? You definitely have laser-focus on proving your business concept, obtaining funding and most importantly, growing your business. Inquiries about startup business insurance usually come when you need to reassure shareholders and customers that you are protecting yourself and them from risk. In a nutshell, you need to show that you’re legitimate. We’ve rounded up 5 essential insurance products that a new startup business needs to consider:
1. Commercial General Liability Insurance (CGL)
CGL Insurance is designed to cover your company’s assets in case you are being sued for bodily injury or property damage to other people/businesses. This would also cover any property in the form of office equipment, stock, IT hardware, etc. Coverage usually includes legal defense, so it’s like having your own built-in legal team. Remember to purchase enough liability coverage—most contracts require $2M, but some larger clients will require $5M or more.
2. Errors and Omission Insurance (E&O)
This insurance is essential for anyone who is offering a professional service. Traditionally reserved for doctors, lawyers and accountants who offer more traditional services, today’s E&O is needed by most startups. If you are doing any type of consulting or technical work, you probably need E&O insurance. Just ask yourself “does anything that my business does or neglects to do, have the potential to harm a client?” If the answer is “yes,” you definitely need this coverage and your clients will likely require it by contract.
3. Cyber Insurance
It seems like almost every day now we are hearing of businesses whose data has been hacked. If you have any client data at all, you probably need Cyber Insurance. In an increasingly-digital world, this is the number one fastest-growing coverage to purchase. Coverage typically includes liability for stolen client data, legal defense and crisis management. This startup insurance coverage is highly recommended and in today’s world, it is essential.
4. Directors and Officers Insurance (D&O)
If you’re looking for the right investor or bringing in the right board members, they’ll want you to have this coverage. Any acts of C-level executives, officers or directors need to be covered under this policy. You may purchase first and third party coverage to protect such things as wrongful acts, shareholder/M&A lawsuits and class-action lawsuits.
5. Employment Practices Liability (EPL) Insurance
Once you’ve purchased D&O Insurance, it is highly recommended that you tack on Employment Liability Insurance. Often confused with Worker’s Comp, this covers the company and executives from potential employee lawsuits. Whether it’s wrongful termination, sexual harassment or human rights claims, this coverage is essential for any employer that has a workforce. If you’re a smaller company and don’t have robust human resources, you’ll want to cover the risk of employee lawsuits with some insurance. Unfortunately, it’s a rite of passage for any growing company.
There are various types of coverage that a business might want to purchase as they grow. Such types include business interruption, crime, employee fidelity, accounts receivable and non-owned auto coverage. A good insurance broker can tell you when it’s essential to purchase each coverage and at what stage as your startup grows from a great idea into a power to be reckoned with.