Complete Guide on Startup Insurance Policies in India

As more people choose to leave corporate life and start their own businesses, the amount of startup advice available on the internet has also multifold. Unfortunately, insurance advice for these businesses has lagged or is frequently non-existent.

One of the most important things to consider as a startup founder when looking to protect your new investment is purchasing insurance. With so many things on your to-do list, getting the right policies may not seem like a top priority, especially if you're just starting out. Many entrepreneurs mistake insurance for just another expense or a legal requirement to check a box. However, running a business entails numerous risks, as accidents can occur at any time and a single claim against your company can result in a significant financial loss.

With the right insurance coverage, you can help ensure business continuity and the proper handling of third-party claims costs. Furthermore, insurance may be a legal requirement, which means that it's often less about whether you need coverage and more about what policies you need.

Is there need of Insurance for Startups?

Yes, insurance is absolutely necessary for startups, but when?

Here are a few indications that insurance is necessary.

• When you collect funds
• Whenever you have clients
• When you have staff
• When you commit to a business venture or contract

Why taking Insurance is important?

You will need to consider everything as an entrepreneur that can expose you to risk of any kind, whether it be financial or otherwise. This comprises:

• Liability - Every startup must take into account all potential liability exposures. Liability may result from exposure to outsiders, incidents involving your employees, injuries brought on by your products, etc.
• Obligations to employees - Despite the fact that your employees are working arduously to realise your objectives, you still have a responsibility to ensure their safety.
• Physical asset risks - Depending on your startup, you may be in charge of a variety of physical assets, such as offices, computers, machines, etc.
• Travel - Employees at a startup may be required to travel for a variety of reasons, including marketing, implementation, support, etc.
• Health - In order to keep talented personnel, companies must take steps to ensure their physical and emotional wellbeing.

7 Types of Insurance Startup Founder must evaluate

1. General Liability Insurance

Startup owners will require this type of policy from the beginning. It is your first line of defense against claims involving physical or bodily injury. This policy will cover the costs of any such claims, allowing your company to continue operating as usual.

2. Commercial Property Insurance 

It is intended to safeguard your startup's physical assets, such as tools, equipment, computers, and office space, as the name implies. Commercial Property insurance will cover the costs if the company suffers a theft, fire, or other natural disaster. However, if you operate in a flood-prone area, you should consider purchasing additional coverage. Commercial Property insurance, like General Liability insurance, is recommended as soon as you start your business.

3. Workers Compensation Insurance

When you begin to add to your team, even if it is just one hire, you must purchase this type of policy because it is a legal requirement in nearly every state. It protects you from financial losses resulting from claims related to bodily injuries sustained by your employees while on the job. Workers Compensation insurance will cover the costs of medical care and rehabilitation. Furthermore, if the injured employee needs to recover and is unable to return to work, this coverage will pay for the lost wages. It is important to note that founders are not required to obtain Workers Compensation insurance for themselves.

4. Professional Liability or Errors & Omissions Insurance 

This policy protects you against a third party's (i.e., a client's) financial loss as a result of your product or service failing to perform as intended or expected. It also protects you from financial losses incurred by that party as a result of an act, error, or omission committed while performing services for another.

10 Financial Ratios that Startup Founder should Monitor Monthly

10 Financial Ratios that Startup Founder should Monitor Monthly

5. Cyber Liability Insurance

Data protection and security are becoming increasingly important as more people rely on the digital route to manage their transactions. Hackers are constantly coming up with new ways to steal sensitive information, and new data breaches make the news every week. It takes an average business 256 days after a breach to realize their data has been compromised. If your startup keeps any personally identifiable information on customers, Cyber Liability is right for you. The policy covers the majority of cyber-related risks, such as data breach costs, notification expenses, fines, credit monitoring, and penalties.

6. Directors & Officers Liability Insurance

As your company expands, so will your workforce. Your Board of Directors and other senior members of management may request protection from claims arising from wrongful acts committed while running the business. This policy safeguards the personal assets of business decision-makers if the company is unable (legally) or unwilling to provide corporate indemnification.

7. Employment Practices Liability Insurance 

As you expand your team, you increase the likelihood that some employees will become dissatisfied or face employment-related issues, such as sexual harassment, discrimination, failure to promote, defamation, or wrongful termination. A single claim can result in financial losses as well as damage to your company's reputation. This policy will protect you against these claims. When the organizational structure expands beyond a few employees and the exposure becomes more widespread, most companies purchase this policy. Startups typically consider purchasing EPLI around Series A or B funding, but there is no specific "right" time to do so.

Choosing the right types of insurance for your startup can be difficult, especially if you haven't had much experience with insurance before. The policies listed above are just a few of the "essential" policies we recommend for entrepreneurs as they nurture and grow their new business. We recommend speaking with a reputable insurance broker about the specifics of your business.

Conclusion

Startup Founder are relieved to hear that moving risk away from the company and themselves is simple with insurance. It's simple to do this in a knowledgeable but approachable way.

The type of business you are starting, whether you have a history of insurance claims or legal actions, the sector, the number of employees, and even funding, will all affect how much startup insurance will cost.

About Jordensky

At Jordensky, we are committed to providing an experience of the highest caliber while specializing in accounting, taxes, MIS, and CFO services for startups and expanding businesses.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate– ”so you can focus on your business.

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