Small Business Insurance Every Startup Needs

If you’re in the process of starting up your own small business, you will put in a lot of your own sweat, money, and time. It’s good that you are geared up with all the entrepreneur enthusiasms and ready to become the next unicorn. But you must be aware about bitter statistics on startups for failing prematurely. In fact, 56 percent of startups fail within the first four years, which is a pretty bleak outlook for startup ventures.

As a startup founder, you know how much time, energy and money it takes to turn your business dreams into reality. So, you can also understand the importance of protecting all your hard work. You don’t want any part of your company to be taken away from you because of legal claims you can’t handle. That’s where startup business insurance comes in. You need to protect yourself and your assets with the proper insurance policies. There are a number of policy options for specific situations, but there are a few kinds of coverage that every startup needs. Explore these crucial small business insurance for startups.

Startup Business Insurance

Here are the Small Business Insurance Policies every startup needs:

General Liability Insurance

The first type of insurance every startup should look into is general liability insurance, which every company needs. The average annual cost of $700-$3200 may seem a little bit high at first—until you compare it to the average cost of general liability claims, which roars to nearly $1 million. There are several policy options, but general liability will cover you for a variety of claims including property damage, personal injury, injury to a third party, and other accidents that are common at the workplace. General liability insurance covers the legal costs, medical costs and repair costs associated. Not only does it cover you and your employees, but this policy also extends to clients, vendors and customers, making it a must-have.

Commercial property insurance

This insurance also goes by the names business property insurance or commercial real estate insurance. Essentially, it protects your building, equipment, tools, inventory, furniture and personal property. It can also help cover some of your business income if you can’t open because of one of the covered losses. Generally, commercial property insurance costs $1,200 to $3,500 per year.

Workers’ compensation

Workers’ compensation insurance will take care of any accidents that happen to your employees when they are on the job. Most jurisdictions require any business that pays employees a standard taxable wage to have a workers’ compensation policy.

The average worker’s compensation case costs business owners over $63K. Not only does this protect your people, but it also prevents you having to make large payouts, which could end up ruining your entire budget for the month. In the event that any of your employees get hurt or have an accident, workers’ compensation will cover the cost of medical expenses, benefits, and wage replacements.

Life Insurance

Your company will live years after you do, and once you’ve passed on, you don’t want any of your interests to crumble. You need life insurance to protect your family and your legacy after you pass on. This insurance is known as “key person” insurance, which offers a fixed monetary payout to provide funding for your family and the company, who will need to replace you when you’re gone. This is especially important in the event of an untimely death. You probably don’t want to think about your early death, but it’s an important component to consider if you want to prepare your business for all events.

Key person insurance can also be purchased by the company on the life of a key executive. The company pays the premiums and is the beneficiary of the policy. In the event of that person’s death, the company receives the payout of the policy. You can expect to pay $1,500 per month to $1,500 per year, depending on how much life insurance you’re purchasing.

Cyber Liability Insurance

Small businesses are an attractive target for cybercriminals because they have sensitive information and typically lack the security infrastructure of a larger business. That includes your customers’ personal information, such as credit card numbers, social security numbers, account numbers, health records and driver’s license numbers. Cyber liability insurance protects your business from the cost of cyber threats or breaches involving computer systems and data.

Cyber liability insurance is also known as cybersecurity insurance or cyber risk insurance. This insurance covers the costs of investigative services, data recovery and identity recovery. Cyber liability insurance also covers damage impacting your customers or business partners because of the cyberattack. These damages include things like legal fees, customer notifications and settlement costs.

Unemployment Insurance

Downsizing is a nightmare… no startup founder wants to face it. But sometimes you may not be able to avoid it. While you don’t purchase unemployment insurance from a provider, like you do for most other types of business insurance, it is another required insurance if you have employees. As an employer, you will pay both federal and state unemployment taxes — the rate of which are determined by the number of employees, rate of turnover and time in business.

You’ll need to contact your state’s unemployment agency and set up an employer account in order to make payments. These payments guarantee a portion of an employee’s salary after a job loss. To help simplify this process, many payroll software providers include calculating and paying payroll taxes in their offerings.
While the cost of unemployment insurance varies by state, the federal tax rate for most businesses is 0.6%.

Professional Liability Insurance

We all make mistakes. And if you run a small business that provides a service to a client for a fee, a mistake can be very costly. Professional Liability Insurance policy, also called errors and omissions insurance (E&O), protects small businesses that provide professional services or advice. It covers lawsuits related to work performance.

If your business gets hit with an errors and omissions claim, you could be facing legal defense costs, including court costs and attorney fees, and paying any settlements or court judgments.

Product Liability Insurance

Any startup company that manufactures, distributes, or sells products needs product liability insurance. It guards against any financial loss that may occur as a result of a product defect. This is especially important to have if the defective product causes bodily harm to the consumer.

Employer-sponsored Health Insurance

Offering health benefits is a major decision for businesses. Employer-sponsored health plans play a big role in retaining talent. You may choose between an HMO, PPO, EPO or POS option. With employer-sponsored health insurance, your company must contribute a minimum percentage and have employees pay the remaining share, usually through a payroll deduction.

How much does business insurance cost?

Business insurance costs can vary widely depending on:

• What your company does.
• How many employees you have.
• Where you’re located.
• How public-facing your business is.
• Your claims history.

To get a ballpark figure, try getting a quote from an online business insurance companies. They can usually show you a price estimate in a matter of minutes, based on some basic information about your business. The best way to find affordable business insurance is to get quotes from several different providers and choose the best option for you.