To lower the risk magnitude of startups, having different types of insurances that provide an all-rounder coverage and security is important.
Starting any business involves a great deal of risk! Whether it is the risk of establishing a successful brand or the financial peril of unpredictable losses. A startup is exposed to multiple threats, and it becomes cardinal to protect it from them!
A startup which has just started to venture into the business world is vulnerable to different liabilities and financial strains that can hamper its growth. A number of startups die before they can even rocket-launch their product or service in the market! To lower this risk magnitude, having different types of insurances that provide an all-rounder coverage and security is important.
The following types of insurances are a must for every startup:
I. Professional Liability Insurance- Every business has a distinct requirement when it comes to its liability. A startup selling its new product would have different sets of liabilities than the startup providing some service to its customers. PLI includes the following types of insurance:
▪ Commercial Liability Insurance- This type of insurance safeguards the business from negligence of employees and other managerial staff. This is a third party insurance which protects it from the actions of people who indirectly put some accountability on the startup.
▪ Product Liability Insurance- If the startup is involved in selling some product, this insurance protects it from any perilous product which may result in an unforeseen consumer lawsuit at a later stage. Product liability insurance can be modified according to the type of product and requirement of the business.
▪ Directors Liability Insurance- This insurance protects the business from any illegal or unlawful acts of the directors.
II. Property Insurance- The property that the startup owns, including the premises where the office and factory are set up, is protected by this insurance from any unforeseen harm, like fire, burglary, etc. However, most insurances do not provide any safeguard from natural calamities.
III. Workers’ Compensation Insurance- This insurance covers things like insurance, medical treatment and compensation to employees for injury caused during their course of employment.
IV. Specific asset Insurance- Immovable assets like special plant and machinery that creates the distinct shape of the product can also be protected by purchasing specific asset insurance for it.
V. Auto Insurance- If the startup delivers its products itself, then the vehicle like the car or van that transports the products can be insured against any accidents or other mishaps.
VI. Insurance of goods in transit- The goods that are transported to be delivered to customers in a different location can be insured in case the shipment suffers from any damage, theft or misplacement.
VII. Business Interruption Insurance- This insurance secures the business in case of any financial hiccups and unforeseen losses. These financial losses can occur because of an inefficient workforce, reduced sales, etc.
However, having all the types of insurances can be financially burdening for a startup. Therefore, it becomes pertinent for it to hire an insurance lawyer and create a single cover policy that is not only versatile but also saves premium. A multifaceted single insurance policy requires a meticulously drafted insurance agreement, which an experienced insurance lawyer can do.