The Importance Of Business Insurance Cover In Start-Ups

The Importance Of Business Insurance Cover In Start-Ups

For many people, the ultimate goal is to have their own business that they can generate an income from. Becoming an entrepreneur is both a freeing experience and character building experience. However, the road through entrepreneurship is never easy. Between the “light bulb” moment and when the business breaks even and starts generating income, an entrepreneur is chatting through murky waters.

There are logistical problems to overcome; there are safety and security issues to keep in mind; there are employee issues to keep ironing out on a continuous basis and much more. All these issues place a young business in a precarious position and expose such businesses to risks of early death.

However, with proper business insurance, entrepreneurs reduce the risk exposure of their businesses to a minimum which increases the business survival chances. To prove this is not just empty talk, herein we are going to explore the importance of start-ups having insurance covers.

#1. Protecting Business Property

For many start-ups the biggest cost involved in setting up the business is the equipment they have to operate while producing products or rendering services. Thus in the event the equipment is damaged or written off due to a disaster or stolen, there a high chance of the business going under. Business property insurance reduces this risk by covering the property and equipment that a start-up uses from smoke and fire damage, water damage, wind, hail storm, vandalism, and even civil disobedience.

Entrepreneurs should consider taking up property insurance to cover their business against a combination of potential risk. Moreover, many of these covers provide compensation for income lost due to the loss or damage to the business equipment. As such, start-ups that do not have ample cash-flow do not have to worry about revenue loss.

Additionally, it is important for home-based start-up entrepreneurs to note that their homeowner’s insurance cover will likely not cover their business equipment. As such, they should purchase home business property covers for their businesses.

#2. Protecting Employee

While at the formative stages of your business you may or may not need some help to run your business, as your business grows, you will need to delegate some departmental tasks. In this regard, you will need to hire employees. Having workers’ compensation coverage is very important as it covers a business against claims made by employees who get injured in the short and long-term while working for your start-up.

Since more often than not workplace-related injuries are expensive claims, they can cripple a business to its knees when they arise. Thus a workers’ compensation cover is very important as it covers a start-up in case of expensive claims are made.

#3. Errors And Omissions Cover

Start-ups dealing in the field of consulting, advertising, (or any other kind of start-up, really) should take a particular interest in this particular coverage. Since they are dealing with privacy, intellectual property, and offering services that are generally never straightforward, there is a high risk of commission of errors and omission.

Such errors and omissions may lead to financial losses and or non-tangible losses. With this in mind, having a professional liability plan covers such business (or any other business) against expensive claims emanating from errors and omissions.

Start-ups dealing in the field of consulting, advertising, (or any other kind of start-up, really) should take a particular interest in this particular coverage. Since they are dealing with privacy, intellectual property, and offering services that are generally never straightforward, there is a high risk of commission of errors and omission.

Such errors and omissions may lead to financial losses and or non-tangible losses. With this in mind, having a professional liability plan covers such business (or any other business) against expensive claims emanating from errors and omissions.

#4. General Liability Coverage

For any start-up dealing with producing physical goods, the number one priority is to ensure that the product works well and does what it should, hence extensive product testing. However, no matter how much product testing a start-up performs, it is virtually impossible to guarantee that every single product will work as intended every single time. By having a general liability cover, start-ups are better placed to handle claims made due to any loss or damage to a person’s property caused by a start-up’s products.

#5. Data Breach Coverage

In an era where every business is collecting and storing information about the customer, instances of lawsuits arising from data breaches are common. Unfortunately, more often than it is impossible for a start-up to guarantee impenetrability of their data storage system. While they can take steps to negate the risk of data breach, there are still risks involved.

As such, start-ups that collect and store information about their customers this insurance policy will cover any claims made due to data breach and exposure of private information. The same case applies for information stored in paper form. Loss of data can take place even when information is stored in physical form.

As you can appreciate, while the vast majority of business covers tend to be very expensive, they are more often than not worth it. They provide start-ups with ample cover to pursue their business goals with the freeing knowledge that the business is covered in the event of natural calamity or a lawsuit. As such insurance cover should be a budgetary item for every start-up, no matter what field they are involved in.

Are you running a home based business? Here is what you need to know about the Home Based Business Insurance.