Starting a Business: All Things Startup Insurance

For most small business owners, dealing with the financial aspects of your business is not the brightest spot of your day. If you own a cupcake shop, you probably aren’t excited about getting into accounting software or dealing with sales taxes. However, finances are a very necessary part of business. Not only do you need to focus on generating your income and satisfying your customers, you must make sure your business’ finances are in order and ready for the worst.

Does a Startup Need Insurance?

A small startup business may seem like it doesn’t need much in the way of insurance. Aside from what is legally required there are a few very good reasons for insurance. First, in its infant stage, a business is most vulnerable. While larger and more established business might be able to survive the loss of inventory or a legal action, a startup will struggle to survive without insurance to stabilize the situation.

Second, a startup is often dependent on things like crowd sourcing, angel investors, or other non-revenue related sources of income. This makes your situation more precarious as they are not sustainable. You may be paying your workers on money left from an investor while you wait for the first big shipment. But what if a flood destroys the product before it gets shipped? It’s important to have insurance to help you survive the inevitable setbacks of the business world.

What Insurances Do You Really Need?

To understand what insurances you really need, look at where your money is going. Most likely, labor (if you have workers), machinery and equipment, and your facility are on that list. The places you are spending money or would be expensive to replace are the things you need to insure. Here are the basic insurances you need as a startup.

General Liability Insurance: This type of policy covers your business from claims like injuries or property damage as a result of a connecting with your business. In addition it covers, slander, libel, and may provide some data breach coverage. It will also help offset legal defense costs.

Property Insurance This coverage protects your business’ physical property, including such assets as buildings, equipment, inventory, furnishings, and computers, from loss or damage as a result of human action (crime) or natural disasters.

Workers’ Compensation Insurance: Workers’ Compensation replaces wages and pays for medical care for employees who are injured while working, as long as they agree to forfeit the right to legal action. Most states require this, as well as Unemployment Insurance and State Disability Insurance.

Commercial Umbrella Insurance: This insurance simply adds a layer of insurance to back up the limits on other insurances and cover odd things which might otherwise slip through the cracks of your other coverages.

Business Income Insurance: Often called Business Interruption or Continuation Insurance, this helps replace the loss of business from an unexpected event. Read more here.

Situation Specific Insurance

There are a number of other insurances which may be applicable to you, depending on your business. Such things as Commercial Auto Insurance, Commercial Flood Insurance, and Management and Professional Liability Insurance, are all important. However, they are only necessary for business owners with certain circumstances like owning a company car, or who have property and inventory which could be damaged by a flood, or who give financial advice as part of their services.

Want to learn more about insurance for your small or startup business? Contact the H&K Insurance Agency. We’ve got an expert team with years of experience in the business world. We will help you find the right type of insurance for your company, to cover you during those highly vulnerable stages. You can also learn more about our business services by clicking here.