Startup Business Insurance: What You Need and Why.

S tarting a new business venture is an exciting journey. However, as you plan for the future of your enterprise, don’t forget to take action to protect your investment and mitigate potential risks. This is where startup business insurance can come into play. Whether you’re launching a tech startup, opening a retail store, or starting a professional practice, business insurance can play a critical role in protecting your startup’s rights and interests now and in the future. The following provides an overview of startup business insurance and the various types to consider for your venture.

What Is Startup Insurance?

Startup insurance refers to the various types of insurance specifically designed to meet the needs and risks newly established businesses face. Individuals obtain homeowners’ or health insurance policies to insure their personal interests. Startup insurance does the same—but applies only to business interests. Depending on the type of coverage obtained, business insurance can help protect a startup from financial losses resulting from lawsuits, property damage, or other unforeseen events and liabilities. By obtaining the right insurance coverage, startup and small business owners can better protect their assets, mitigate risks, and ensure the enterprise’s continuity, future growth, and success.

Do I Need Insurance for a Startup Business?

In short, the answer to this question depends on a few considerations. Whether and to what extent your business may be required to obtain business insurance will depend on factors such as:

The type of goods or services you provide
Whether your business has employees
The state in which your business operates

For example, some states and industries may require certain professionals, such as doctors, lawyers, or engineers, to carry professional liability insurance to protect against claims of negligence or errors. Additionally, if your startup has employees, most states will require that you obtain workers’ compensation, which is designed to provide benefits to employees who suffer work-related injuries or illnesses. That said, regardless of whether or not you are required to obtain insurance for your startup or small business, doing so is almost always strongly recommended.

Take action to protect your investment and mitigate potential risks.

Startup Business Insurance Costs

The business insurance cost for a startup will ultimately depend on a variety of factors, such as the following:

Types of coverage needed to protect your company
Particular industry in which your venture operates
Location or locations where you conduct business
Number of individuals employed
Financials of the business (e.g., annual revenue, amount of assets, etc.)

The cost of business insurance can vary significantly. Thus, don’t feel like you have to go with the first quote you receive. Be sure to shop around and compare various policies, benefits, and rates. Such comparison will help to better ensure you get the right policy for your business’s needs and goals at a price that works with your budget.

Common Types of Insurance Coverage to Consider for Your Startup or Small Business

Type of Business Insurance

General Liability Insurance

Commercial Property Insurance

Business Interruption Insurance

Workers’ Compensation Insurance

Commercial Auto Insurance

Professional Liability Insurance

Cyber Liability Insurance

Business Owner’s Policy

What It Covers

Bodily injury and other claims arising out of accidents on the business premises;
Property damage;
Legal costs arising out of a lawsuit against the business; and
Copyright, defamation (libel and slander), advertising, and other miscellaneous claims.

Helps protect the physical property used to operate your business. Typically insures property such as:

The building itself,
Equipment,
Tools,
Furniture, and
Goods and inventory.

Provides benefits to cover expenses and lost income during a covered loss while the business is otherwise unable to operate. Often provides coverage for:

Lost income,
Included in incorporation fee for the first year, then $125 a year thereafter
Rent,
Payroll.

Covers injuries and illnesses sustained while working on the job. Typically provides compensation for:

Medical expenses arising out of the injury or illness,
Included in incorporation fee for the first year, then $125 a year thereafter
Ongoing care and physical therapy,
Lost wages, and
Disability benefits.

Protects against claims arising out of on-the-job auto accidents. May provide coverage for:

Vehicle and other property damage,
Bodily injury liability, and
Included in incorporation fee for the first year, then $125 a year thereafter
Uninsured motorist (UM) or underinsured motorist (UIM).

Provides coverage for claims arising out of negligence, malpractice, or errors made by certain professionals in the course of their business. Also referred to as Errors and Omissions (E&O) coverage.

Helps to cover financial losses a business suffers in the event of a data breach or cyber attack.

Comprehensive business insurance package that combines several key coverages into a single policy. Frequently includes:

General liability insurance,
Included in incorporation fee for the first year, then $125 a year thereafter
Commercial property insurance, and
Business interruption insurance.

By obtaining each of these under one policy, many small businesses can get a more favorable rate.

Which Businesses Can Benefit

Businesses of all shapes and sizes can benefit from general liability insurance coverage.

Commercial property owners,
Retail stores,
Manufacturing businesses, and
Other brick-and-mortar establishments.

Restaurants,
Retail stores, and
Other businesses that are dependent on their physical location, assets, or inventory to operate.

Businesses who have or plan to have employees.

Delivery service providers,
Transportation companies,
Construction businesses, and
Any company that owns or operates vehicles in the course of its business operations.

Doctors,
Lawyers,
Real estate professionals,
Accountants,
Architects, and
Engineers.

Healthcare providers,
Financial institutions,
E-commerce businesses, and
Any other businesses that collect or store sensitive customer data.

Great for small to medium-sized businesses looking to bundle several coverage types that commonly impact businesses.

Two people learning how to run a business

Why You Should Obtain Business Insurance for Your Startup

No matter how well you plan, there is always a chance that problems may arise, including:

Fires or other natural disasters
Physical injuries
Data breaches
Theft
Lawsuits

Obtaining insurance for your startup or small business is one of the best ways to protect your company from these or other unexpected events that could otherwise lead to significant losses and interruptions to your operations. Your enterprise is a critical investment. Thus, even if business insurance isn’t required for your startup, obtaining some level of coverage is one of the best things you can do to protect your business and provide peace of mind as you continue to build toward your long-term success.

Disclaimer: Bizee and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.