May 26, 2017 | 4-minute read (800 words)
By: Maxime Rieman
Director of Product Marketing at CoverWallet
Every business faces unique risks and should consider different insurance policies that are applicable at each point in its launch and growth periods. From conception to hiring to the first IPO, every business will have some key policies in place that may not be necessary or appropriate at other points. Between the launch and growth period, different forms of coverage may be essential to keeping your company running smoothly and being protected should any issues arise.
After moving out of the launch phase and into a period of growth, your business will have many of the same concerns as other established businesses. A new influx of customers and clients will increase your liability concerns in ways that did not exist during launch, while you also may find you need to begin meeting legal insurance requirements.
There are several key concerns during your launch phase. These include testing out your idea, conducting appropriate market research, developing a solid business plan, securing cash resources, and selecting the correct business structure. Within these areas, you’ll need to think about your liability concerns, especially when it comes to your funding and business structure.
Starting out, particularly if your company is digital, you are not likely to have as many concerns more commonly associated with established businesses. For companies with a physical presence, a good number of liability concerns come directly or indirectly from dealing customers or clients. Business owners must consider how employees handle client accounts or even what happens to partners when they come into your physical building; all of these are fundamental concerns for any company.
As you start gaining traction with customers and get a first office, it’s important to understand certain coverage optimization strategies. A Business Owners Policy is a valuable combination of two key coverages: General Liability and Commercial Property. General Liability is designed to protect your business against third-party claims related to bodily injury (such as slip and fall), property damage, or even copyright infringement. The Commercial Property aspect to a BOP insures the value of your business property against named perils and theft.
If your company provides advisory services, Errors & Omissions insurance will be crucial to protecting your growing business in case of employee mistakes. This insurance policy provides liability coverage for professional services companies, in particular, helping to mitigate situations where clients or customers experience a loss due to an employee’s mistake or oversight while in the course of handling the client’s account. Such mistakes may be particularly common in the growth phase, and especially with new employees who may not have as much experience.
Should your business collect or store sensitive data digitally, Cyber Liability insurance may be a must from the very start of your business. There’s a good chance that your business already has proprietary information or other private information stored on servers. This can include personal data for new employees. That data needs to be protected in case of a data breach, which can occur far too often these days, especially for small businesses, and the cost of a breach scales according to the number of compromised records.
Even for an early stage startup, you may also find that you need to purchase a Worker’s Compensation policy. How many individuals you employ before this becomes a legal requirement will vary based on the state in which you operate and the type of business. However, it is common for businesses with around five employees to need Worker’s Compensation coverage.
As your business develops, Employment Practices Liability Insurance (EPLI) should also be a consideration, as it protects against a variety of employment-related scenarios such as harassment and discriminatory practices. Although you may not be doing as much hiring during the launch phase as you will do later on during your growth period, you will still be making important hiring decisions at this point. EPLI will protect your business against claims of unfair hiring practices.
A Directors & Officers insurance policy is designed to cover claims against those on the management level that might impact stakeholders. Claims can come from many different parties, but during the launch phase, they’re more likely to come from investors who may disagree with management decisions.
Whether your business is in the growth phase or building toward a successful launch, liability concerns do exist. A few insurance considerations can make a big difference and work to help hedge your bets against many common liability concerns.
Educating and assisting shoppers about financial products has been Maxime Rieman's focus, which led her to joining CoverWallet, a startup dedicated to simplifying insurance for small businesses. Previously, she launched the personal insurance team at NerdWallet, and helped create an innovative brokerage comparison product.