Why is Insurance for Tech Companies Important?
Ultimately insurance comes down to protecting your company, your employees and your growth. But it can be difficult to know what insurance your startup needs. Some policies are required by law while others are required by investors. Some policies you may have never even heard of!
Insurance should be seen as more of an investment than a cost. A good policy lets you free up your time, energy and money to focus on growing your business. But the lives of founders and startups can be chaotic. Sometimes insurance becomes more of a “check-the-box” activity.
When used properly, insurance policies provide value to companies that goes well beyond what a “set it and forget it” approach provides. If you’re investing in the stock market, do you buy a couple shares and then just ignore them? No, chances are you monitor your investments, tailor them as your needs and goals change and work with an advisor who can help you along the way.
Aside from meeting certain legal and compliance requirements, here are a couple important benefits startups enjoy when they have the right insurance coverage:
Attract Investors – investors do everything in their power to eliminate risk from the equation. One of the ways they do this is by requiring companies to get certain types of insurance coverage.
Keep Customers Happy – many of your customers will demand it proof of insurance, particularly if you’re in the B2B space.
Hire Top Talent – as you grow, so does your risk exposure. Having right coverage in place will give you peace of mind and time to focus on scaling your business.
Scale – as you grow so does your risk exposure. Having right coverage in place will give you peace of mind and time to focus on scaling your business.
Disrupt– when you’re taking on entire industries and shaking up the status quo, something’s bound to go wrong. Someone’s probably going to sue you at some point. Whether the danger is coming from competitors or regulators, you’ll have a black hole of time-wasting paperwork and legal fees on your plate if you don’t have the right insurance in place.
Recommended policies for SaaS companies
These coverages form the foundation of any risk management program for Startup companies.
General liability offers broad protection against some of the most fundamental risks companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
Cyber insurance protects companies from third-party lawsuits relating to electric activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.
Employment Practices Liability Insurance
Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. This coverage protects companies against lawsuits related to employment practice
Startups Specific Coverage
These policies are essential for or can be tailored to the needs of companies operating in the Startups companies.
Directors & Officers Insurance
Shareholders, competitors, investors, etc., can sue a company’s directors and officers, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Errors & Omission (Professional Liability) Insurance
Professional liability, also known as errors and omission (E&O) insurance, covers companies in third-party or client lawsuits claiming substandard work or service. Work errors or oversights, missed deadlines, budget overruns, etc., often result in costly cases — but E&O insurance responds to these mishaps.
Workers’ Compensation Insurance
When employees sustain work-related injuries, employers are typically responsible for their medical costs and lost wages. This policy covers these expenses, protecting employees while simultaneously keeping companies running smoothly.
Types of Ecommerce Companies that need insurance
- Media and Advertising
- Healthcare & Biotech
- On- Demand
- Professional Services
- Real Estate
- Venture Capital