Business Insurance Guidelines for Start Ups

May 31, 2017 · 5 minutes to read

As a start up business owner, you know how hectic and exciting the early stages of building a new company can be. With all of the other time consuming tasks on your plate, you may not have factored in securing insurance.  Many emerging entrepreneurs are uncertain about what kind of protection is suitable for their particular business or even about if and when they need it at all.

An enterprenuer looking at a tablet

The fact is that there is more litigation directed against private companies now than ever before.  Having insurance will help you better cope with the possible road bumps ahead. If your product harms someone (e.g. E&O/Product Liability), or if your product damages someone’s property (Commercial Package: Property), and even in the unfortunate event of bankruptcy, you can set up the right insurance to respond (e.g. Directors & Officers Liability Insurance). With the appropriate coverage in place early on, you will benefit from added security, lower premiums and an additional forward-thinking measure to help you successfully move beyond the start-up phase. Navigating through the elaborate world of insurance can be a daunting task for both the emerging entrepreneur and the seasoned business owner; I’d like to help get you started.

The Start-Up Phase

During the start-up phase you’re quite busy to say the least. It is common for companies to purchase their first insurance due to mandatory stipulations in a lease or contract however, there are other types of protection that could impact your business. Consider these types of insurance coverage as your company enters its first major phase of development:

  1. Workers’ Compensation: Have you hired employees?
  2. Commercial Package Policy: Are you leasing space or equipment?
  3. Umbrella Liability: Do you need higher limits?
  4. Professional Liability: Do you provide service for a fee?
  5. Employee Benefits: Do you want to attract and retain employees?
  6. Management Liability: Do you have investors?

1. Workers’ Compensation

Worker’s Compensation is mandatory once you hire your first employee.

  • Cost Estimate: Cost is based upon on total payroll and job duties of your employees, but typically isn’t more than $3,000 if you have under 5 employees.
  • Covers: Medical costs and income replacement for employees injured while on the job. Employer’s Liability: Defense of a company against suits brought by employee(s) for a company’s negligence, i.e. unsafe working conditions.

2. Commercial Package Policy

This is the core of your risk management program and will satisfy a handful of requirements by a landlord (for your new lease), your customer who requires evidence of liability, and anyone leasing you equipment.  Contains two or more lines of coverage usually property and general liability (and sometimes auto and umbrella).

  • Cost Estimate: For small companies, cost is often less than $2,500.
  • Covers: Property, Business Interruption/Extra Expenses (can be modified to cover continuing expenses, and milestone payments), Employee Theft, General Liability, Products Liability, Basic Automobile Liability and Employee Benefits Liability.

3. Umbrella Liability

Your landlord may require limits higher than what is provided through your general liability policy and this is a simple way to add limits to the existing coverage.

  • Cost Estimate: For small companies, cost is often about $1,000 per $1M of Umbrella limit.
  • Covers: Umbrella Liability expands the limits of the Commercial Package Policy: Auto, General Liability, Employee Benefits Liability, and Employers Liability.

4. Professional Liability (a.k.a. Errors and Omissions/E&O)

If you provide service(s) to others for a fee then you likely have professional liability exposure. Additionally, lawsuits can be brought against you even if you didn’t do anything wrong. Generally companies consider this as a reaction to a contractual requirement.

  • Cost Estimate: Type of coverage varies greatly based on your occupation but costs can be less than $2,000.
  • Covers: Protect your business from customer lawsuits related to “negligence” or “failure to perform.”  Defense and litigation costs related to errors, omissions or negligent acts from your service or products that cause financial loss to your client. Allegations may include: Error, omission, or negligence in providing a service; Failure to provide a service, Violation of good faith, Overpromising, Improper documentation, Malpractice, Mismanagement, Misrepresentation of facts, Nondisclosure, and/or Violations of state and federal law.

5. Employee Benefits

The more robust your offering the more attractive your company will be to existing and potential employees.

  • Cost Estimate: Cost depends on the specific offering you develop.
  • Covers: Basic employee benefits such as medical, life, vision and dental. Employers with 10+ employees can also consider disability and 401k

6. Management Liability

This is often required by investors to protect your business and personal assets as an officer or director of the company from fiduciary/monetary allegations by outside investors, suppliers or other counterparties.

  • Cost Estimate: Costs begin around $2,500 to $15,000 based on level of coverage.
  • Covers: Directors & Officers Liability/D&O, Employment Practices Liability/EPL (Discrimination, Harassment, etc), Fiduciary Liability (401K plan lawsuits).

I know that in the exciting early stages of building a new business there are already a lot of things to think about. While you’re finding investors, developing your product, and designing a web site, consider this friendly reminder to procure business insurance early. If things get bad, having the right insurance can protect all your hard work. Having foresight will help avoid, or better cope with, some of the obstacles that can get in the way of your success.

BizInsure Guest Blogger: Scott Eberhard

Talk to us

Today’s BizInsure offerings are just the beginning. Please take the time to tell us what you think, offer advice, ask questions, give compliments, or make a request…customer feedback defines us. We’re listening. Click here to contact us.

Get Free Online Quotes and get coverage instantly

The coverage you need for your business.

Business insurance is divided into different policies. We offer 4 types so it's easy to design the coverage that fits your business.

Professional Liability Insurance

Get a quote

General Liability Insurance

Get a quote

Business Owner’s Policy (BOP)

Get a quote

Workers Compensation Insurance

Get a quote

Let's find

The coverage you need for your business

Professional Liability Insurance

Get a quote

General Liability Insurance

Get a quote

Business Owner’s Policy (BOP)

Get a quote

Workers Compensation Insurance

Get a quote

21st Century QHC agency for Home care insurance company.
Tie J.
Andrea Mcgee was great to work with
Audra M.
Customer representative extremely professional and courteous!
DJ Jeff B
I wanted to add another letter to one word on my street, and the website allows me to do that, and it took less than 5 minutes for them to approve the amendment. How wonderful, I love their service very much.
Ema F.
Representative was very kind, helpful, and educated me well. I appreciated today's experience.
Tina P.
Thanks for the overall service. The rates were great, and they were able to cover the services that was needed. Please call BIZinsure for your commercial needs.
Cheequanda M.
Responsive and easy
Crime R.
I have used BizInsure for 2 years and they make the renewal process quick and easy.
hospicecare 4.
Excellent business and great people! They have out done our prior insurance of 23 years! Keep up the good work!
James F
Very satisfied with the application process, Andrea was very helpful and friendly. Great service ! Thank you !
Don C.
No waiting !!!
Renee G.
Very good company to do business with.
Jeff M.
Teven Lous was wonderful to work with. Thank you
Valerie K.

Popular Searches

Google Rating
Based on 121 reviews