What Business Insurance Startups Need

When you’re heading into the exciting world of entrepreneurship, insurance might be the last thing on your task list, but business insurance helps to safeguard you, your business, and your employees against liabilities and loss.

Some types of insurance are required by law, while other coverage types may be prerequisites to meet the terms of agreements with your partners or financial investors. Read on for a list of insurance policies you should consider in order to protect your startup business.

General liability insurance

Liability insurance, or Commercial General Business Liability, is insurance coverage that can protect you from a variety of claims that can arise from your business operations. You’ll rely on your liability insurance to protect your business in the following instances:

• You get sued and you need money to pay your lawyers and any potential settlement or reward.
• You owe medical costs in case someone gets hurt on your property.
• You need to pay for property damages or injuries caused by you or an employee.
• You must pay your landlord in case the property you rent catches fire or suffers other damage.
• General liability insurance can also help you cover claims of false or misleading advertising, including libel, slander, and copyright infringement.

Depending on your industry and business coverage needs, annual liability insurance premiums can range from several hundred dollars per year to thousands annually. However, should you be sued, being adequately insured could prevent you from losing much more than the relatively small cost of business liability insurance.

Commercial property insurance

Commercial property insurance can help you out if your property is lost or damaged in many different circumstances, such as:

• Fire or smoke
• Wind and hail storms
• Civil disobedience and vandalism

Commercial property insurance covers much more than just the building in which your business is located. The property covered by this insurance can include furniture, equipment, computers, and documents.

Workers’ compensation insurance

If you have employees, then it’s highly likely your state requires you to have worker’s compensation insurance. If one of your employees is injured on the job and can’t work as a result of the injuries, then your worker’s compensation insurance will help cover their medical expenses, any physical rehabilitation they must undergo, and it will pay them a percentage of their lost wages. In exchange for worker’s comp, as it’s commonly referred to, your employee gives up the right to mire you and your business in a lawsuit, which should save you both in the form of money and headaches.

Commercial auto insurance

Many business owners don’t obtain commercial auto insurance, because their personal auto policy covers the way they use their vehicle. However, if you use your car for any business purpose other than commuting, then there’s a good chance you could benefit from a commercial auto insurance policy.

If you use your car to transport equipment, supplies, or commercial goods, if you chauffeur people as part of your work, or if employees regularly need to operate your vehicle, then you should definitely discuss a commercial auto insurance policy with your insurance agent.

Commercial flood insurance

Many businesses are located in places where flooding is a common occurrence. In this case, commercial flood insurance is a no-brainer, but even if you aren’t located in a flood zone, you should consider getting commercial flood insurance if there’s a possibility your business would suffer in a flood due to heavy rain, melting snow, hurricanes or tropical storms.

Most property and business owner policies don’t cover damage caused by flooding, so check your policy; if it doesn’t cover flood damage, you should consider adding a flood policy. A standard flood policy will protect against damage to your building plus the contents if you choose to include both on your policy. Depending on your needs, you may decide to insure both to protect the structural elements of your business’s property, such as walls, floors, equipment and fixtures, plus the property held inside the building, such as inventory, furniture, and wall and floor coverings.

Commercial umbrella insurance

Sadly, lawsuits are unthinkably common these days, and they can easily destroy a business that isn’t properly insured. If a lawsuit were to max out the limits of your general liability insurance, commercial auto insurance, and employer’s liability policies, then having a commercial umbrella policy in place could increase your liability protection.

This coverage can potentially fill the gaps where these other coverages reach their limits. Commercial umbrella insurance gives your business additional financial protection from damaging lawsuits or accidents.

Management and professional liability insurance

Management and professional liability insurance is also known as professional liability insurance (PLI), professional indemnity insurance (PII), or errors & omissions (E&O). If a customer or client were to sue you for making a mistake or an oversight in your services or product that caused them damages, then this insurance would help cover the defense costs and the damages awarded from this type of lawsuit.

Business Income Insurance

In case of a natural disaster, most businesses think to insure themselves to cover damage to property, but this type of policy won’t replace income lost due to a service interruption. This is where business income insurance comes in to cover that gap. Also known as business interruption or continuation insurance, this insurance helps replace loss of income in case the regular operation of your business is suspended; that way you’re able to meet your financial obligations such as rent or payroll.

Having the right insurance coverage can help protect your finances and your company. It can be tough to think about getting sued or living through a natural disaster. We like to be optimistic and to think that these things can’t happen to us, however, many business owners have lost their shirts because they were underinsured. Talk to other experienced business owners and find out what business insurance policies they recommend, and then speak to a trusted insurance agent to get your business covered.

Learn more about business insurance for start-ups by exploring The Harford’s Business Owners Playbook.

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