5 Benefits Insurance offers Startups

By StartUp City | Tuesday, October 06, 2020

As startups are more exposed to setbacks, insurance policies help them stay protected.

FREMONT, CA: Setting up a business is not an easy task. Some might say that a startup starts with an idea. However, understanding the ideas is not an easy task as well. It requires investment and perseverance to grow that idea and get profits from it. However, the harsh truth is that 90% of the startups eventually fail. In most cases, startups tend to run out of money. In some cases, that same money could have meant success in the future.

Insuring a startup is a unique way of securing a business against unexpected situations. As such, insurance can be classified into two main types: insurance for protecting property and insurance that protects against legal commitments. The crucial point is to ensure that the policy is apt for the business difficulties at hand. It is vital to ensure the level of insurance coverage equals up to the business needs at multiple stages of growth. Many startups even have policies that are customized to their business requirements. Here are some of the primary things that startups benefit from insurance.

Financial Safeguarding

Startups need Commercial General Liability (CGL) insurance that provides financial protection to the business in case of a claim, lawsuits, or settlements. There can be an extensive array of events that may necessitate CGL insurance, such as the result of any personal injury lawsuits. CGL meets the cost of a legal defense for claims related to property damages, external party injury, and advertising injury. 

Coverage of Property 

A startup needs property insurance for its office space and infrastructure. It covers an enterprise's physical assets from damage or loss. A good policy covers entities such as buildings, equipment, inventory, computers, fixtures, and furniture. It is important to go for a policy that covers all the above assets irrespective of whether they are privately owned or leased. Many property insurance policies grant protection in the events of loss incurred even for repair and replacement owing to man-made events such as theft and fire. In some cases, property insurance covers the expenses that is required to keep the business operational despite damage or loss.

Business Officials Protection

D&O liability insurance covers the person from losses when they are accused while serving as an officer or director of a corporation. It may also cover legal fees and other costs acquired by the organization due to such a suit. D&O insurance can be one of the following types:· If the directors and officers were not recompensed by the organization citing the reason such as wrong decisions had resulted in heavy business loss. D&O insures the officers and directors in such a case. · In cases where a business indemnifies officers and directors, D&O covers the businesses defense costs as well.· In case of shareholder lawsuits or action over security matters, D&O covers the costs for the company.   

Curbing Cyber Threat

Small businesses and startups are prone to be targeted by cybercriminals. The purpose behind such a trend is that small firms lack the employee and resources to cover themselves up against cyber-attacks. Moreover, startups are quick with hectic state of affairs. A cyber attack for a startup could result in broken business losses. Thus, startups should improve their flexibility against such unexpected events using cyber insurance. Cyber insurance covers direct damages to the company and also against the claims laid against the organization by a third party.

Coverage of Auto Liability

If a business is at its beginning stage and the business owner uses a vehicle to drive business, most personal auto insurance covers the vehicle if business travel is less than four times in a month. However, a commercial auto policy is a better option if the personal auto insurance seems incompetent or doesn't cover business travel at all. Though commercial insurance policies are expensive, they have more comprehensive coverage in terms of liability limits. For example, a commercial insurance policy may cover multiple kinds of vehicles, such as specialized or modified transportations and heavy-duty vehicles.

Insurance can provide the next chance to a startup in case of a significant setback. Insurance can also support the new players in managing their state of affairs continuously. The critical point for a startup is to understand the vulnerable areas and buy insurance policies accordingly.

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