Startup Insurance - an Insurance Guide for Innovators
It's not uncommon for innovative, growing companies to view startup insurance as optional.
Startups should, without being required to be an insurance expert, have the opportunity to understand exactly what they need, when they need it, and how (startup) insurance supports their vision and business. Naturally, you this should be connected to the most efficient, easiest, cost effective, way to make an informed decision around purchasing these products.
By adopting this viewpoint, the ability to gauge what you actually need vs luxury coverage becomes the onus of your service providers, not yourself (you have enough to focus on already).
First-time founders are less likely to implement insurance because of various reasons… typically because of its difficulty, cost, other priorities and sometimes even a perceived lack of value.
Repeat founders and seasoned entrepreneurs, however, understand its importance intimately and will take out insurance early on.
There are opportunities for both to have a better, more efficient, easier, and cost-effective insurance experience.
Startup insurance may not be top of mind with all the moving parts your growing company may be dealing with...
In the past, traditional insurance was extremely slow and delivered cloudy pricing guidelines. The traditional route is going by the wayside, like a lot of other analog processes.
InsurTechs have created instantaneous ways to purchase insurance policies for your startup. This is appealing, but how do you know what you need, when you need it, how much you should pay, what is important, etc.?
A US based InsurTech, called Assurely, now allows you to not only implement insurance with very little friction, but adds a consultative intelligence to help you secure only the insurance you need, when you need it, through an easy and cost-effective process.
Assurely delivers market-driven (meaning your business/operations warrants the need) targeted (think customized) insurance for changing industries and innovative companies
This process includes a data-driven, intelligent process to help you, the founder and entrepreneur, easily determine what, where, when, etc. to make a decision very fast and responsibly that allows you to go back to focusing on executing on your vision and growing your business.
Do Startups Need Insurance
Yes, 100%, startups need insurance, but the questions is… when?
Here are a couple of triggers for when insurance is required
When you raise money
When you have customers
When you have employees
When you sign a partnership or contract
A growing company can run their business following all the guidelines and as correctly as possible... yet customers, investors, and/or employees can still sue; for no reason in fact.
Often times, the insurance industry states that companies planning for growth should know that postponing the process of obtaining the proper coverage until when you "need it" is wrong; this is a theory that should be challenged.
One startup's coverage may differ than the next; regardless of what growth stage the company is currently at.
Insurance providers that help you understand the “why”, providers that have a data-driven way to evaluate your business and intimately understand your needs; these are the providers you should be gravitating towards.
It should be noted: getting insurance in place sooner will help all avoid many of the common hindrances to a growing company: for example customers, investors, and lenders that require insurance.
Who Needs Startup Insurance?
Any size business that plans for exponential growth will need to have their insurance strategy sorted out early on, even if it means exploring a strategy consultation (free) to understand what you should be covered for, why, and what milestones trigger the need for more or an updated insurance portfolio.
Things will go wrong, period. You and your employees will make mistakes.
Regardless if it is big or small, often or rarely, mistakes happen especially when you are running a company. Even if you didn’t intend to make a mistake, companies, their boards, and their management teams are personally at risk. This is why insurance exists.
Your next question should not be if, but what, when, and how much is appropriate for your stage and budget.
What kind of insurance is needed for a Startup company.
Every company is different. Startups are no different. The more your startup grows, the more complex your insurance needs will become.
The type of startup insurance you need will become more complex as your startup grows.
Next is a quick look at how a high-growth startup’s most basic coverage needs can evolve over various phases of growth.
Recommended coverages for Startups
Now that you have a baseline of what kinds of coverages you might need, how do you customize your insurance?
A SaaS company’s insurance is different than a Direct-to-Consumer CPG company’s insurance needs and so on.
Recommended coverages should be based on a data-driven risk identification process and should produce targeted insurance driven by your companies’ risks in the market. This should happen fast and should be able to meet you digitally just like nearly every other industry and marketplace that you purchase from.
Cyber Liability
Startups and businesses of any size are highly recommended to carry Cyber Liability insurance. The policy covers financial loss from data breaches, ransomware, and other cyber incidents. Cyber Liability also covers the cost to get a company back up and running if the business stops due to a cyber incident.
As companies rely more on technology to run their business, and significant increase in businesses experiencing cyber related claims issues, Cyber liability becomes more and more important.
General Liability
Here are a few examples of how general liability covers your business:
Property Damage: In the case of water damage (one of the most expensive property damage insurance claims), general liability coverage can help pay the plumber, pump the water out from the basement, and hire a professional to dry out and prevent mold damage.
Advertising injury: If another company sues for infringement of copyrights or even intellectual property, General liability can cover associated legal fees when they sue.
Bodily injury: If a visitor slips or gets injured in the workplace, general liability could cover the health related bills.
Product liability: Most general liability insurance also covers product liability, so businesses that sell, manufacture, or distribute consumer goods also need coverage.
However, it doesn't include liabilities that stem from your position as an employer or your professional services. You need other types of insurance for those liabilities. (fitsmallbusiness.com)
Property Insurance for Startups
Physical assets, including buildings and inventory can be covered by implementing property insurance. Example events include fires, storms, and even vandalism... however flood damage is typically not included.
Business Owner's Policy
Startups may consider Business owner's policy (BOP), which combines both Commercial property insurance and general liability in one, typically with a more affordable price point. Business owner’s policy can cover lawsuits, fire, and even theft, all under a single coverage. Not every business will qualify for this policy, but startups have a better chance to be offered affordable pricing.
Additionally Startup Insurance Policies to consider
Directors & Officers insurance
(Tech) Errors & Omissions insurance
Key Person insurance
Commercial Crime insurance
Conclusion
New founders are pleased to learn that with insurance, transferring risk away from the business, as well as themselves, is easy. It’s easy to do this in an informed, yet non intimidating manner.
Startup insurance costs will be dependent on the type of company you are growing, if you have any history of insurance claims or lawsuits, the industry, the number of employees, and even funding.
Quotes may vary between insurance providers. In the past, working with a single agent to get multiple quotes was standard, but with Assurely, insurance for innovators, you can get what you need, when you need it, and add coverage in depending at what growth stage you're currently at.
