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5 Primary Insurance Policy Benefits for Startups

By Insurance CIO Outlook | Thursday, October 24, 2019

Insurance Policy It is imperative for startups to stay protected and benefits that insurance policies offer could be a boon. Here's more to it.  

FREMONT, CA: Setting up a business is not an easy job. Some might say that a startup begins with an idea. However, realizing the ideas is not an easy task. It requires investment and patience to grow that idea and get returns from it. However, the harsh reality is that 90 percent of the startups eventually fail. In most of the cases, the startups run out of money. In some cases, that money could have meant success in the future.           

Insuring a startup is a great way of securing a company against unforeseen situations. As such, insurance can be categorized into two main types: insurance for protecting property and insurance that protects against legal obligations. The essential point is to ensure that the policy is right for the business challenges at hand. It is imperative to ensure the level of insurance coverage matches up to the business needs at various stages of growth. Some startups even have policies that are customized to their business needs. Here are some of the primary things that startups benefit from insurance.

Financial ProtectionInsurtech Startups

A startup needs Commercial General Liability (CGL) insurance that offers financial protection to the business in case of a claim, lawsuits, or settlements. There can be a wide array of events that may require CGL insurance, such as the result of any personal injury lawsuits. CGL covers the cost of a legal defense for claims related to property damages, third-party injury, and advertising injury. 

Property Coverage

A startup requires property insurance for its office space and infrastructure. It covers an enterprise's physical assets from damage or loss. A good policy should cover entities such as equipment, buildings, inventory, computers, fixtures, and furniture. It is important to go for a policy that will cover all the above assets irrespective of whether they are leased or privately owned. Many property insurance policies offer protection in the events of loss incurred even for repair and replacement owing to man-made causes such as theft and fire. Lets understand that in the case of a home-based business, homeowner's policy will not cover any losses incurred to business properties. In some cases, property insurance also covers the expenses required to keep the business operational despite loss or damage.

Protection to Business Officials

D&O liability insurance covers the individual from losses when they are sued while serving as an officer or director of a business. It may also cover legal fees and other costs incurred by the organization due to such a suit. D&O insurance can be one of the following three types:

· If the directors and officers were not compensated by the company citing the reason such as incorrect decisions had resulted in heavy business loss. D&O insures the officers and directors in such a case.

· In cases where a company indemnifies officers and directors, D&O covers the company’s defense costs as well.

· In case of shareholder lawsuits or action over security concerns, D&O covers the expenses for the company.

See Also: Top Insurtech Startups

Cybersecurity

Small businesses and startups are more likely to be targeted by cybercriminals. The reason behind such a trend is that small businesses lack the staff and resources to cover themselves up against cyber-attacks. Moreover, startups are agile with hectic state of affairs. A cyber attack for a startup could result in irreparable business losses. Thus, startups should enhance their resilience against such unforeseen events using cyber insurance. Cyber insurance will not only cover direct losses to the company but also against the claims laid against the company by a third party.

Auto Liability Coverage

If a business is at its initial stage and the business owner uses a vehicle for business driving, most personal auto insurance will cover the vehicle if business travel is less than four times a month. However, a commercial auto policy will be a better option if the personal auto insurance seems inadequate or doesn’t cover business travel at all. Though commercial insurance policies are costly, they have broader coverage in terms of liability limits. For instance, a commercial insurance policy may cover various kinds of vehicles, such as specialized or modified vehicles and heavy-duty vehicles. 

An insurance cover can offer a next chance to a startup in case of a major setback. Insurance can also assist the new players in managing their state of affairs uninterrupted. The critical point for a startup is to recognize the vulnerable areas and buy the insurance policies accordingly.

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