Running a business is inherently risky. For instance, a client can sue you, claiming a contractual breach, an employee may suffer an illness or injury at work, or a natural disaster can damage your property and halt your operations. Therefore, you should take proactive measures to protect your business and personal assets. One of the things you can do to achieve this goal is to carry the right business insurance coverage right from the start. Mark Vanzo from Smart Business Insurance suggests these types of business insurance that you need as a startup company include:
1. General Liability Insurance
General liability insurance covers claims emanating from your business operations and products. Your policy will protect you against third-party liability claims related to:
- Bodily injury
- Personal injuries, such as slander or libel
- Property damage
For instance, if someone slips and falls on a wet floor in your premises and they sue you for the injuries, your general’s liability insurance policy should cover it.
2. Commercial Property Insurance
Commercial property insurance protects your rented or owned building/structure as well business assets inside your business premises. If you run a small business, the least expensive and convenient way of getting commercial property insurance coverage is by purchasing a BOP (business owner’s policy), which combines liability and property insurance.
3. Workers Compensation Insurance
All states, except Texas, require businesses that employ workers to carry workers’ comp insurance. This policy protects workers against the financial costs associated with a work-related illness, injury, or death. The coverage pays for the following:
- Medical care for work-related illness or injury.
- Lost wages if a worker misses work due to a workplace illness or injury.
- Disability benefits if an employee is permanently or temporarily disabled.
- Compensation if a worker dies due to a work-related injury.
It’s important to note that for the most part, workers’ compensation insurance also protects employers against lawsuits related to workplace accidents.
4. Commercial Auto Insurance
Personal car insurance policies typically exclude coverage if a vehicle is mainly used for commercial purposes. Commercial auto insurance not only covers your business-owned vehicles, but also vehicles you’ve leased or rented for business purposes. It provides coverage for:
- Auto accident liability
- Medical payments
- Collision and physical damage
- Accidents involving underinsured/uninsured motorists
5. Data Breach Insurance
If your startup handles PII (personally identifiable information), it’s prudent that you carry data breach insurance/cyber liability insurance. This policy helps businesses respond to data breaches. It can cover the costs of:
- Notifying affected individuals
- Creating a PR campaign to remedy the reputational damage caused by the data breach.
- Offering credit monitoring services
6. Commercial Flood Insurance
Typically, commercial liability insurance doesn’t cover flood damage. Conversely, a commercial flood insurance policy, as the name suggests, covers flood-related damage.
7. Commercial Umbrella Insurance
A commercial umbrella insurance policy provides liability coverage on top of the existing liability coverage. It’s meant to protect your business and personal assets in case of claims that exceed the coverage limits of your underlying liability policies. For instance, your commercial insurance policy will kick in if a customer sues you due to a bodily injury, and you’re required to pay them damages that exceed your general liability insurance policy limits.
8. Professional Liability Insurance
If your business entails providing professional services like giving advice or physical care, you should consider carrying professional liability insurance/errors and omissions insurance. If a client sues you due to the professional services you’ve rendered, this policy will cover your legal expenses including damages, if any.
9. Director & Officers Insurance
A directors & officers insurance/D&O insurance policy protects your business’s officers and directors from liability claims. This can include paying for legal expenses and judgments emanating from lawsuits relating to how they run the business.
10. Business Income Insurance
Business income insurance covers your lost business income if you’re forced to halt operations due to covered property damage. This coverage can also cover your ongoing business expenses including:
- Utility bills
11. Home-Based Business Insurance
The standard homeowners’ insurance doesn’t sufficiently cover home-based businesses. So if your business is home-based, you should consider getting a home-based business insurance policy. This policy is specifically designed to cover the liabilities associated with home-based businesses.
12. Key Employee Insurance
A key employee is an individual whose skills and knowledge contribute considerably to your company’s income. A National Association of Insurance survey revealed that about 70% of small businesses rely on one or two individuals for their success. Losing such an employee can have a significant negative financial impact on your business. Key employee insurance compensates you if you lose your key employee(s) due to reasons such as death or disability.
How Much Insurance Do I Need?
You should determine the right amount of business insurance to carry; otherwise, you’ll either be underinsured or over insured. To figure out the ideal amount, you should list all your business’s assets — including inventory, equipment, and property. An insurance company or agent familiar with the kind of risks that come with your type of business can then help you settle on an adequate amount of business insurance.
To protect your startup company adequately from business related risks, carry the 12 business insurance policies discussed in this article.