Just released: How to raise venture capital in 2023

Download

The “Dos” &”Don’ts” of Buying Startup Company Insurance

TL:DR

Key Takeaways

Carl Niedbala - Founder Shield
Carl Niedbala

COO & Co-Founder

Buying startup company insurance can be a daunting task.  The insurance market is fragmented and there is no shortage of products out there.  The industry is not exactly tech savvy either, and many brokers still employ tools as archaic as fax machines in their practices.  Just finding where to start can be a hassle!

Discover the essential guidelines for acquiring the best insurance for startups. Uncover the key dos and don’ts when securing coverage for your burgeoning company.

1. Dos

a. Vet Your Broker

When you purchase EPL insurance, you have to hire a broker to approach the right insurance companies on your behalf. You should make sure that your broker fully understands your business model and where the inherent risks to your company lie. Sometimes these risks may even be more nuanced than originally expected, and finding the right broker to flush out those risks and make sure they’re mitigated is key.

So how do you do this? The same way you would with any vendor or service provider. Ask your investors and fellow entrepreneurs for their opinions and recommendations. Read up on the potential partners to understand their philosophy and approach. Talk to your broker to verify what you’ve read and check in with current clients if possible to see how their experience has been, especially if they have needed specialized coverage like content creator insurance. Make sure you understand the application process and you’re on board with their methods.

It’s important to make sure you feel good with this partnership because having to explain and re-explain your business to every broker you work with just causes more headaches down the road. You want your broker to be in your corner and excited about your business and the roadmap moving forward.

b. Ask Questions

Once you’ve found your broker, don’t hesitate to dig into the coverage and ask questions. Insurance should be viewed as an investment rather than just another cost, and your broker should know this. Ensure that you’re making the right investment. You want the right coverage for your risk profile, effective risk control measures, flexibility to modify coverage as your company changes, and scalability to add coverage as your company grows.

2. Donts

a. Go to Multiple Brokers (at first…)

The usual method of shopping around doesn’t really work in your favor when buying insurance for your startup company.  Here’s why:

When a broker approaches an insurance carrier on your behalf, they become the exclusive “broker of record” that’s allowed to talk to that carrier.  Only one broker can talk to any one carrier at any given time.  This ensures your broker has the chance to make his/her case on your behalf without any background noise.

When you approach multiple brokers at the same time, they’ll almost certainly go to the same markets (those that are best for your specific startup) assuming they know what they’re doing.  Depending on the order in which you approached each broker, each will be blocked at certain markets because another has already approached them.  The pipeline gets clogged and your time/energy gets wasted.

Again, this is why vetting your broker and sticking with him/her is key. You want to make sure that you go with a broker that has strong underwriter relationships with the carriers most relevant to your startup company, including those that offer start up tax credits. The application can be annoying and you don’t want to do it more than once. The right broker will leverage the right underwriters at the right carriers the first time, saving you valuable time and effort, and helping you to maximize your start up tax credits.

If your broker strikes out on finding the right policy related to sample insurance requirements, it’s time to consider approaching another broker. Here’s a valuable tip for this situation: be sure to request the previous broker to provide you with all the applications that were submitted on your behalf, along with a comprehensive list of declining carriers. This proactive step will significantly streamline the process moving forward.

b.  Withhold Information

This seems to come as a surprise to many but underwriters require quite a bit of information to create a coverage proposal.  This is particularly true for policies that are extremely important for most startups, such as technology errors or omissions insurance, cyber liability insurance, or directors and officers insurance.  Don’t be surprised if you’ll need to submit things like financial statements, sample customer contracts, written HR practices, and investor decks.

To optimize your chances of securing favorable terms and premiums for your insurance coverage, it’s crucial to provide your broker with comprehensive information. Armed with a thorough understanding of your risk profile, your broker can effectively advocate on your behalf with the underwriters. Avoid the unnecessary hassle of withholding information, as the underwriter will likely request it eventually, prolonging the process. Streamline the communication by proactively addressing all underwriter queries, ensuring a swift and efficient turnaround for your formal proposal. This approach not only saves time but also enhances your overall proposal insurance experience.

So those are some basic pointers related to buying startup company insurance.  Hopefully these help make your insurance purchasing process as smooth and seamless as possible!


In need of insurance (or someone to talk to about insurance)? Have no fear! Our team is awaiting your call. Give them a ring at

(646)-854-1058 or shoot them an email at info@foundershield.com We’re happy to help!

[vc_btn title=”GET A QUOTE” style=”outline-custom” outline_custom_color=”#ee2524″ outline_custom_hover_background=”#ee2524″ outline_custom_hover_text=”#ffffff” shape=”square” size=”lg” align=”center” link=”url:https%3A%2F%2Fapp.foundershield.com%2Fusers%2Fsign_up|||”]

Related Articles

cyber insurance pricing trends 2024
March 13 • Cyber Liability

Cyber Insurance Pricing Trends 2024

Uncertain about cyber insurance costs in 2024? Our article explores pricing trends, expert predictions on rate increases, and strategies to potentially reduce your cyber insurance premium.

cyber liability insurance premiums
March 4 • Cyber Liability

7 “Must Haves” For Cyber Liability Insurance in 2024

With cyber liability insurance premiums rising, business leaders must have the inside scoop to keep costs low. Our partners at Blacksmith InfoSec delve into those tips and tricks.

talent acquisition for startups
February 15 • EPLI

How Talent Acquisition for Startups Can Impact Risk Management

Talent acquisition for startups can be a deciding factor toward success or failure for the company. This post reviews the intricacies of this endeavor and tips for leaders to navigate it savvily.

Cybersecurity Data Breaches
November 9 • Cyber Liability

Top 10 Cybersecurity Data Breaches of 2023

Today’s digital landscape is frightening for business leaders. Here’s a glimpse into some of the most cringe-worthy data breaches in 2023 — plus, how to avoid them.

Cyber Insurance Pricing Trends
July 19 • Cyber Liability

Cyber Insurance Pricing Trends 2023

After a hard-hit 2022, let’s explore the lessons learned, what currently impacts the cyber market, and cyber insurance pricing trends to expect in the future.

EPL Insurance Pricing Trends 2023
June 6 • EPLI

EPL Insurance Pricing Trends 2023

The past few years have caused many employment-related challenges, triggering EPL insurance policies. Here’s what to expect from EPL pricing in 2023.