01Apr

As a fresh-faced startup, there are so many things to consider before the first transaction is happily completed! Negotiating for practical coverage or bundling business insurance may not be the first thing on your to-do list, but it should be considered very early on. New businesses are not completely immune from claims and a few mistakes could be made during various stages of the learning curve. 

Compelling Reasons for Insurance’s Critical Importance:

As you are just starting out, you will most likely want to win over new clients and customers. Some businesses may refuse to work with you if you don’t have the proper coverage. Eager VC firms and angel investors will want to see that you are well-organized and that you have taken inventory of potential risk factors. Since you’ll be taking numerous risks, no two days will quite play out the same. As a startup, we understand that every penny needs to be used wisely, but if any form of accident takes place, you could be required to make good on owed expenses out of your own pocket. 

What is the Difference Between Limited Liability and Insurance?

Limited Liability Companies (or LLCs) protect owners from extreme lawsuits along with the potential for severe debt risk. 

Limited Liability protects owners from incurring sudden debts and hefty fines. If an LLC happens to go bankrupt, owners won’t have to pay debts with any of their hard-earned personal assets.

Insurance protects businesses from liabilities and debt incurred over time or suddenly. Insurance also offers financial protection from severe data breaches or theft, legal action, and natural disasters. 

What Types of Business Insurance Do Startups Need?

The most practical type of business insurance for you will depend on your business type and model. Many varieties that are in place to protect you from serious losses or damage, which can stem from all types of risk. A combination of a few types of policies may be the best choice, as worker’s compensation, property insurance, and general liability may all make sense at different intervals. 

Types of Liability Insurance:

Limited liability insurance coverage protects you from very high medical costs, or legal fees when a petition or lawsuit begins. 

  • General Liability Insurance covers your necessary obligations for sudden injuries, accidents, and gross negligence. Even though some people think that home business owners don’t need this protection, it is a good idea because your homeowners’ policy may not provide enough protection for other risks and liabilities. 
  • Professional Liability Insurance is also known as errors and omissions insurance and is widely used in the service industry. This coverage protects from employment-related claims of negligence or malpractice. 
  • Product Liability Insurance covers many of the “new breed of entrepreneurs” and influencers that you see endorsing products online. More importantly, it protects the manufacturers and distributors, along with the retailers who provide point-of-sale. If products such as skin care goods and other wellness items cause allergy or unintended injury, this type of coverage will protect you from liability. 
  • Employment Practices Liability will protect your entity or LLC from employment-related claims that are becoming much more commonplace. Discrimination and wrongful termination have many different faces in this new era, and businesses struggle with remaining compliant and transparent. 

Types Of Commercial Property Insurance: Commercial property insurance is there for you when you have issues with physical assets. Severe weather has been on the rise as of late, and even the best in meteorological equipment isn’t 100% accurate during the torrential spring months. There are a few different types of very helpful policies:

  • Property Insurance will thankfully reimburse you in full if your property suffers damage or is destroyed by fire. Theft and storms are also covered under property insurance, and are both occurrences that are now drastically on the rise. 
  • Vehicle Insurance covers any damage to vehicles used for business purposes. An unforeseen incident can happen at ANY time to ANYONE, regardless of who is at the helm. If you are involved in an accident with a third party, your expenses will be covered by your provider. 

Types of Business Income Insurance: Lost income can drag a business down suddenly when times are already tight. Staying open is so very crucial, as every single dollar coming in counts when things get a bit lean. Compensating for lost income is a true beacon of comfort and stability after dealing with the unexpected.

  • Business Interruption Insurance will help with relocating, paying wages, and rent if you need to suddenly move or cease operations. Some providers refer to this as Business Income Insurance
  • Extra Expense Insurance will pay for expenses after you undergo a disruptive event. The funds received will most likely go to repair costs and replacement of the property. 

Other Types of Business Insurance

Here are some other common types of insurance that we can familiarize you with here at the Alexander Agency of St Charles:

Worker’s Compensation Insurance pays for the crucial lost wages you’ll encounter in times of need. It also provides medical care for any employees who suffer injuries. Almost all states require this type of compensation when a business reaches a certain number of employees. 

Identity Theft Insurance is also commonly known as breach insurance. This provides liability coverage to businesses after a data breach occurrence. It may also cover the cost of providing services to customers who have found themselves victims of malicious identity theft. These advanced criminals can even commit crimes in your name, leaving you in varying degrees of serious trouble. 

Umbrella Insurance extends your coverage to losses that go above and beyond limits imposed by other policies. 

Business Owners Policy is a broad policy that includes commercial property, general liability, and business interruption insurance. This is a very popular option for many businesses, as the sensible combination of elements offers security and peace of mind. 

Home-Based Business Insurance covers property damage and business liability elements for those who do business from home. This form of coverage is now much more frequently sought after, with the recent pandemic dictating more individual’s choice to conduct business from home. 

Do I need Business Insurance for an LLC?

An LLC offers the owner a form of liability protection but you will still need another form of insurance coverage. This will aid in protecting you if you are in a high-risk venture such as farming or engineering. Many types of businesses run the risk of these occurrences:

  • Extreme illness
  • Payouts for workers compensation
  • Legal liability 
  • Equipment damage 

If you do choose to run your LLC without company insurance, it is much like going through everyday life without health care. Even if you don’t expect an injury or illness, this provision can be a great help in the long run. Even the most basic form of LLC coverage beats none at all. 

Liability protection and business insurance can be a huge source of security for many enterprises or brand-new startups. We have steered many business owners toward success and a lifetime of fulfillment here at the Alexander Insurance Agency of St Charles, and are eager to learn more about your daring and decisive dreams!