Why is Insurance for Startups 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:

  1. 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.
  2. Keep Customers Happymany of your customers will demand it proof of insurance, particularly if you’re in the B2B space.
  3. Hire Top Talentas 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.
  4. 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.
  5. 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.

Startup industries we specialize in

Saas

Fintech

Ecommerce

On-Demand

Media & Advertising

Professional Services

Healthcare & Biotech

Real Estate

Manufacturing

Venture Capital

Protect Yourself and Your Company

What insurance coverage do startups need?

Breakdown of what insurance startups need

General Liability & Property

What does it cover?
Protects the organization from some of the fundamental risks that come with running a startup.‘Slip and fall’ claims, damage to a third party’s property, products liability claims, damage to rented space, and personal or advertising injury claims are the bread and butter of a good GL policy.

Why you need it?
It forms the foundation of any company’s risk management program. On top of protecting the company from legal liability caused by bodily injury or property damage, this coverage is usually required in commercial contracts like office leases and vendor agreements.

Cyber Liability

What does it cover?
Protects your company from lawsuits, fines and penalties arising out of a hacking attack or data breach. It can also reimburse the company for direct expenses like breach notification costs, credit monitoring, data restoration and forensic analysis.

Why you need it?
If you collect any sort of personal or organizational information, process transactions, have a “login” feature on your site, integrate with another organization’s systems in any way, have employees who could fall for a phishing scam, generate online content such as blog posts or even simply rely heavily on email communications, you need cyber liability insurance.

Errors & Omissions (E&O)

What does it cover?
Aka “Professional Liability” or “malpractice” insurance. This policy covers the company if a third party claims they lost money because of an act, error, or omission that occurred while the company was providing its professional services.

Why you need it?
Complex litigation is expensive. This pays legal fees and judgments or settlements from a lawsuit for an alleged failure in the provision of professional services. Everybody makes mistakes. This policy helps ensure that a small mistake doesn’t turn into an existential crisis

Workers Compensation & Employers Liability

What does it cover?
Provides a legally required coverage protecting employees if they are physically injured or get sick while on the job. Legal requirements vary state-by-state.

Why you need it?
Because the government says so! Fines could be imposed on any company that doesn’t comply with their state’s workers comp laws. Employers liability coverage also provides valuable legal defense costs if a lawsuit develops in connection with the injury or illness.

Directors & Officers (D&O)

What does it cover?
Protects the company and its leadership from liability related to the management of the organization. Companies that indemnify their executives against covered claims can turn to their D&O policy for reimbursement. If the organization itself is named in a suit, the policy would defend the entity in addition to its leadership.

Why you need it?
Ensures the company and its leadership are protected from allegations that they breached their fiduciary duty and other management-related claims. It provides the capital required to absorb certain legal costs without mortgaging the future of the entire organization.

Key Person

What does it cover?
Think of key person insurance as life insurance that pays out to the company. Some policies are actually very similar to a traditional term life insurance policy. Other policies are newer products designed to cover costs associated with a key person’s death without actually being life insurance.

Why you need it?
If you’re dealing with the death of a key person on your team, you will have a tremendous challenge ahead of you. Key person insurance makes a few of those challenges much more manageable so you can focus on your team and the future of your business.

Employment Practices Liability

What does it cover?
Protects the company and its management by paying the costs of defending against certain suits from employees or investigations from government agencies. Common claims include allegations of harassment, discrimination, retaliation and wrongful termination.

Why you need it?
EPLI claims are becoming more and more prevalent, and the startup world is far from immune. If you or the organization itself is named in such a claim, the insurance company would defend you and pay the judgment or settlement against you.

Commercial Crime

What does it cover?
Protects the company from loss caused by certain illegal activities. Unlike many other commercial insurance policies, it has nothing to do with defending against lawsuits from third parties. This policy instead reimburses the company itself for losses of money, securities or other tangible property that it directly experiences.

Why you need it?
Most businesses are exposed to the risk of criminal activity. This insurance protects your company from crimes committed within the company itself as well crimes committed by people or other factors outside of your company. Common claims include:

  • Employees stealing money from the company or clients.
  • Inadvertently accepting forged checks or counterfeit money.
  • Non-employees stealing from the company’s office or from the premises of the company’s bank.
  • Robbery of valuables while in transit under the care of a messenger or armored car.
  • Computer and wire transfer fraud.

General Liability & Property

What does it cover?
Protects the organization from some of the fundamental risks that come with running a startup.‘Slip and fall’ claims, damage to a third party’s property, products liability claims, damage to rented space, and personal or advertising injury claims are the bread and butter of a good GL policy.

Why you need it?
It forms the foundation of any company’s risk management program. On top of protecting the company from legal liability caused by bodily injury or property damage, this coverage is usually required in commercial contracts like office leases and vendor agreements.

Cyber Liability

What does it cover?
Protects your company from lawsuits, fines and penalties arising out of a hacking attack or data breach. It can also reimburse the company for direct expenses like breach notification costs, credit monitoring, data restoration and forensic analysis.

Why you need it?
If you collect any sort of personal or organizational information, process transactions, have a “login” feature on your site, integrate with another organization’s systems in any way, have employees who could fall for a phishing scam, generate online content such as blog posts or even simply rely heavily on email communications, you need cyber liability insurance.

Errors & Omissions (E&O)

What does it cover?
Aka “Professional Liability” or “malpractice” insurance. This policy covers the company if a third party claims they lost money because of an act, error, or omission that occurred while the company was providing its professional services.

Why you need it?
Complex litigation is expensive. This pays legal fees and judgments or settlements from a lawsuit for an alleged failure in the provision of professional services. Everybody makes mistakes. This policy helps ensure that a small mistake doesn’t turn into an existential crisis

Workers Compensation & Employers Liability

What does it cover?
Provides a legally required coverage protecting employees if they are physically injured or get sick while on the job. Legal requirements vary state-by-state.

Why you need it?
Because the government says so! Fines could be imposed on any company that doesn’t comply with their state’s workers comp laws. Employers liability coverage also provides valuable legal defense costs if a lawsuit develops in connection with the injury or illness.

Directors & Officers (D&O)

What does it cover?
Protects the company and its leadership from liability related to the management of the organization. Companies that indemnify their executives against covered claims can turn to their D&O policy for reimbursement. If the organization itself is named in a suit, the policy would defend the entity in addition to its leadership.

Why you need it?
Ensures the company and its leadership are protected from allegations that they breached their fiduciary duty and other management-related claims. It provides the capital required to absorb certain legal costs without mortgaging the future of the entire organization.

Key Person

What does it cover?
Think of key person insurance as life insurance that pays out to the company. Some policies are actually very similar to a traditional term life insurance policy. Other policies are newer products designed to cover costs associated with a key person’s death without actually being life insurance.

Why you need it?
If you’re dealing with the death of a key person on your team, you will have a tremendous challenge ahead of you. Key person insurance makes a few of those challenges much more manageable so you can focus on your team and the future of your business.

Employment Practices Liability

What does it cover?
Protects the company and its management by paying the costs of defending against certain suits from employees or investigations from government agencies. Common claims include allegations of harassment, discrimination, retaliation and wrongful termination.

Why you need it?
EPLI claims are becoming more and more prevalent, and the startup world is far from immune. If you or the organization itself is named in such a claim, the insurance company would defend you and pay the judgment or settlement against you.

Commercial Crime

What does it cover?
Protects the company from loss caused by certain illegal activities. Unlike many other commercial insurance policies, it has nothing to do with defending against lawsuits from third parties. This policy instead reimburses the company itself for losses of money, securities or other tangible property that it directly experiences.

Why you need it?
Most businesses are exposed to the risk of criminal activity. This insurance protects your company from crimes committed within the company itself as well crimes committed by people or other factors outside of your company. Common claims include:

  • Employees stealing money from the company or clients.
  • Inadvertently accepting forged checks or counterfeit money.
  • Non-employees stealing from the company’s office or from the premises of the company’s bank.
  • Robbery of valuables while in transit under the care of a messenger or armored car.
  • Computer and wire transfer fraud.

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