By Parker Rains
Regardless of industry or size, all companies have at least one thing in common—the need for insurance. But for a startup that might only have a few employees, navigating the insurance world can seem daunting.
Further, many startups buy into the misconception that they are too small to need additional policies outside their standard commercial general liability (CGL) policy, while others incorrectly assume CGL insurance is an all-encompassing solution.
Your CGL policy covers against any general third-party claims of things like bodily injury or property damage. It doesn’t however extend to things like workers’ compensation claims or damage to your property caused by a natural disaster.
To ensure your startup is covered, here are four types of insurance you need—in addition to your general liability policy:
Commercial Property
Commercial property insurance covers your business’ physical assets—things like your building, inventory, prototypes and documents, computers and furniture—from loss or damage. This type of policy protects your business against damage caused by water leakage, natural disasters, fires, vandalism or robberies.
Many property insurance policies also include business interruption insurance coverage in the event that unexpected damage or events require you to suspend operations. These policies cover up to 12 months of lost income. Check with your insurance broker to see if this is an option for you.
Employment Practices Liability (EPL)
No matter how big or small your company is, there is always the potential for employee-related problems. The minute you interview your first job candidate, you are at risk of an employment claim. If you decide not to hire him, he could allege some sort of discrimination. And even if you do hire him and then later fire him due to poor performance, he could claim wrongful termination. If you find yourself facing an EPL claim and you’re not protected with proper insurance, it can be extremely costly.
EPL insurance protects your business against legal issues that stem from employee-related matters, such as discrimination, retaliation, harassment, wrongful termination and disputes about salary or hours worked. EPL policies will reimburse your company for the costs of defending a lawsuit in court, including judgments and settlements.
Workers’ Compensation
Even if you’re a small shop, workers’ compensation insurance is crucial, as accidents are unpredictable and often unpreventable. Plus, it’s a legal requirement in most states and few exclusions apply. With workers’ comp, you can ensure that you are able to pay a sick or injured employee’s wages and medical costs in the event of a work-related accident. Without it, you’d be stuck paying the bill out of pocket.
Because the rules around workers’ comp insurance vary by state and can change over time, it’s always a good idea to talk with your broker to understand what rules apply to you.
Cyber Liability
Cyber crimes are growing in numbers and in strength—so much so that it has become a question of “when” not “if” a company will be hacked. And the average cost for a small business to clean up after being hacked is $690,000, according to the Ponemon Institute. So it’s no surprise that 60 percent of small businesses close their doors within six months of being attacked, per the National Cyber Security Alliance.
Purchasing cyber liability insurance keeps your business running in the event of an attack, and it covers crisis management costs, notification fees, regulatory proceedings (fines and penalties) and credit monitoring expenses for victims of the breach.
Founding a company requires an incredible amount of time and energy—not to mention money. Don’t blow all the hard work you’ve put into your company by failing to properly protect yourself. Safeguarding your company against unexpected risks and claims could save you thousands of dollars in the long run.
Parker Rains, based in Nashville, is vice president of middle market business insurance firm, Fisher Brown Bottrell Insurance, which is a wholly owned subsidiary of Trustmark National Bank, a publicly traded financial services company with over 200 locations and over 3,000 associates in Mississippi, Florida, Tennessee, Alabama and Texas. You can reach Parker at prains@fbbins.com, and visit Fisher Brown Bottrell Insurance online at www.fbbins.com.
