Beyond all the usual ingredients for a successful launch, you don’t want to underestimate the value of business insurance as you get started. Below are five business insurance policies that can help your startup get off the ground.
1. GENERAL LIABILITY INSURANCE
Maybe your startup began at your dining room table, but when you’re ready to make the leap to renting an office, you’ll want to consider general liability insurance. Before you sign a commercial lease, know your options and responsibilities. General liability coverage applies when your business is responsible for common accidents, such as:
- Third-party bodily injuries.
- Third-party property damage.
- Advertising injuries.
Most commercial landlords require tenants to purchase this policy and to name them as an additional insured so they get some protection, too. That’s because property owners can also be held liable if someone visiting your business is injured.
For example, if a delivery person slips on the icy front step of your office, he or she could try to hold you and the building owner accountable. But if you have general liability insurance that extends some coverage to your landlord, your policy can help pay for both of your legal expenses.
These situations are more common than you might think. According to a recent study by The Hartford, 40 percent of small businesses will experience a general liability claim in the next 10 years.
2. BUSINESS OWNER’S POLICY
Cash might be tight, but it’s still important to protect your property and your livelihood. By insuring your business property and your income, you will be in a better position to rebound and keep growing even if the worst happens.
Taking these precautions doesn’t have to break the bank. You can buy a business owner’s policy (BOP), an insurance package that combines general liability insurance and commercial property insurance, at a reduced rate.
Commercial property insurance can help pay to repair or replace your business property that’s lost or damaged because of:
- Theft or vandalism.
Some BOPs also include business interruption insurance, which can help replace your income when a covered property claim keeps your business from operating. That income protection can help you recover from an unexpected disaster quicker.
3. PROFESSIONAL LIABILITY INSURANCE
When you started out, there’s a good chance your first clients were people you already knew. But once you’re ready to expand and to land new customers, you may need to purchase professional liability insurance.
Also known as errors and omissions insurance, this policy can cover professional mistakes. For example, it can help cover your legal expenses if you’re sued over:
- Delivering late or incomplete work.
- Failing to deliver the work as promised.
- Making a professional error.
- Offering negligent services.
Those lawsuits can be pricey, too. According to a litigation impact study published by the Small Business Administration in 2005, a small business lawsuit might cost anywhere from $3,000 to $150,000.
Lastly, many companies won’t even consider doing business with startups that don’t have professional liability insurance. This coverage assures potential clients that if something goes wrong, you will be able to pay for your mistakes.
4. CYBER LIABILITY INSURANCE
Between HBO’s recent hacking troubles leading to online leaks and the WannaCry virus impacting more than 200,000 victims in at least 150 countries, it’s obvious that hacking is one of the top threats businesses face. While your startup probably isn’t protecting intellectual property on the level of upcoming “Game of Thrones” episodes, you may have other information hackers want: customer names and credit card numbers.
Think you’re not a target because you’re too small? Think again. Sixty-two percent of all cyber attacks are directed at small- and mid-sized businesses, according to Property Casualty 360. If your business gets hacked and customer information is stolen, cyber liability insurance can pay for:
- Customer notification.
- Credit monitoring.
- Legal expenses.
In many cases, this coverage can be the difference between surviving a data breach and closing up shop for good.
5. WORKERS’ COMPENSATION INSURANCE
Hiring employees is an obvious sign of startup growth. However, depending on which state your business is located in, it could mean you also need to purchase workers’ compensation insurance.
If an employee is injured on the job, workers’ comp can pay for their:
- Medical bills.
- Recovery costs.
- Partial missed wages.
Most states require businesses to purchase workers’ comp coverage when they hire their first employee, although there are exceptions. Check the workers’ compensation laws for your state to make sure you are compliant.
Rebecca Hosley is a content writer for Insureon, an online small business insurance agency. She specializes in writing about small business insurance and tech startups.