Understanding Different Types of Business Insurance for Startups
Starting a new business usually means purchasing a long list of items that amount to thousands of dollars in expenses. Business insurance also needs to be on the list so that you can protect everything you buy of value. Part of launching a startup involves reviewing costs carefully to avoid over-spending, but you need sufficient insurance coverage so that your operation is not overrun by disruptions.
10 Types of Business Insurance Every Startup Should Have
- General Liability Insurance
This type of insurance is the most common among businesses and costs between $500 to $3,000 per year. Since the average cost of a business liability claim is around $1 million, it is important to develop a financial safety net to pay for unforeseen disasters that can potentially sink a company. General liability insurance covers bodily injury and property damage incurred by visitors to your establishment.
- Product Liability Insurance
Manufacturers that develop and distribute products need product liability insurance to cover issues resulting from faulty products. It is particularly important to secure this coverage to ensure the safety of consumers. Moreover, defects can lead to product recalls, which can prove to be an expensive setback.
- Professional Liability Insurance
Errors and omissions (E&O) can occur with any product on an assembly line and can be traced to negligence. E&O coverage is a part of professional liability insurance, which covers errors such as bad advice and improper installations.
- Commercial Property Insurance
If you own a commercial building, you need to ensure it the same way a homeowner insures their property. The coverage protects your commercial property against various disasters such as fire, severe weather, and damage caused by vandals.
- Home-based Business Insurance
Having a home-based business has become common in recent years, and it requires its own insurance coverage separate from homeowners insurance. Over 52% of small businesses are home-based, according to Forbes. Home-based insurance covers damage to your business equipment as well as business liabilities.
- Workers’ Compensation
Every state has certain workers’ compensation requirements, with most of them legally mandating employers to cover expenses incurred by employees due to on-the-job injuries and illnesses. If the employee is unable to work, the coverage includes loss of wages. Thus, workers’ comp pays for medical bills and rehabilitation of injured or ill employees.
- Directors and Officers Insurance
This coverage protects business owners from the consequences of wrong decisions or actions of directors or officers that could hurt the company’s financial health.
- Life Insurance
Setting up a company that continues even after you have passed away can be done with life insurance. This policy pays benefits to your family or survivors, ensuring that your legacy continues even when you are not around.
- Business Income Insurance
If a shutdown ever disrupts your business, business income insurance pays for the loss of income that results from such disruption by covering the wages, rent, and other fixed expenses.
- Unemployment Insurance
When a business must make budget cuts and is forced to terminate an employee for no fault of their own, this policy pays them an unemployment wage for a specific term.