Start-up companies are popping up quickly in today’s fast-paced world and entrepreneurs often find that they’ve forgotten to get essential business insurance to protect their company.
While the owner may tell the board that the business has an insurance policy, this doesn’t mean that the company has the insurance needed. Every company needs insurance that is both adequate and optimized.
To get started, business owners should take these five forms of protection into consideration:
1. Comprehensive General Liability (CGL) Insurance Coverage
This is a type of insurance that protects companies against cases brought against them for the following: Third party bodily injury, building damages, loss of personal effects, and marketing and advertising injury.
What owners should understand about CGL insurance is that it’s designed to pay for your defense when a claim is brought against the company. Ideally, you are allowed to select your own lawyer to avoid any potential conflicts of interest.
The reason why you need this insurance is that many contracts require businesses have at least $1 million in this type of insurance coverage. Even if you don’t think your business needs this level of coverage, you’ll need to purchase it for this reason.
2. Directors and Officers (D&O) Liability Insurance
Although you may have highly influential individuals on your board to help grow your business, these professionals are going to insist on increased insurance coverage.
* Essential to any startup is side A D&O insurance coverage which protects directors and officers from cases of “wrongful acts” or situations where their decisions had a negative effect on the business’s value.
* Side “B” protection protects the company by indemnifying the director or office as well as paying for the defense costs.
* Side “C” coverage protects the firm in the case of a shareholder or class action over securities concerns.
When you have the choice of coverage, many companies select only A and B. These plans leave out judgments as well as any situations where individuals performed in dishonest actions that broke the law or acted in self-interest.
3. Cyber and Media Insurance
Since there have been several high-profile hacking situations for businesses today, the need for cyber insurance is obvious. However, there is not any basic cyber plan available and each insurance provider policies contain untried provisions, terms, and multiple interpretations.
Like the coverage described, these plans offer protection for defense and indemnity. They also can provide solutions for compliance with government and disclosure needs and also crisis management in the case of a breach or incident.
Because not all policies may have a “basic” option, your startup needs to take extra measure. Governments recommend following best practices and establishing firm policies so insurance firms are withholding claims from businesses that they believe did not follow industry standard programs to protect sensitive information.
4. Property Insurance
This type of coverage is designed to protect against any physical damages to the business property. There are a few options but the best choice for coverage is an “all risk” option which will protect against the building and also material and devices inside the building.
Any startup that has a significant infrastructure is going to need this coverage. Tech companies are certainly in need of this coverage option. The policies will safeguard against any damage to web servers and companies may also include disruption protection for any losses due to downtime needed to replace or repair any devices. Inclusions in these policies may be due to damage or loss that’s caused by equipment malfunction, normal aging, and defects.
5. Employment Liability Insurance (EPLI)
This is an important insurance to have and different from the worker’s settlement insurance policy that all states require. It may be purchased in a bundle with worker’s comp or even D&O coverage.
Because discrimination insurance claims are expensive for companies and difficult to work out, this protection is essential for any startup that employs individuals who are popular as well as highly competent.
It may seem like a lot, but each type of insurance covers specific risks that most small businesses face. If you are unsure of your current protections or need someone to help you understand your current risk profile, please reach out to our team of professionals right away. We’re here to help!