Nearly every day there are new tech advancements emerging that make running our lives easier and more efficient. This digital transformation comes with the emergence of new tech startups. The startup landscape continues to flourish, and it shows no signs of stopping anytime soon.
Just like any other business, a tech startup comes with possible risks. That’s why it is important to have adequate insurance. It will protect your startup against huge financial losses, and mitigate risk exposure. It will also give you some peace of mind that you can continue your operations in case something unfortunate happens.
Why do startups need insurance?
Cost is one of the things that tech startups usually consider when it comes to purchasing insurance. Some do not prioritize insurance since it can be seen as an additional expense. And while it’s true that premium payments can add up, you should think of your coverage as an investment that will protect your startup in case an unexpected incident occurs.
Without insurance coverage, you may be left paying for damages out-of-pocket. So, ask yourself this, could you afford to pay for damages resulting from an injury or lawsuit? If not, you need to have insurance.
How are premiums calculated?
The cost of premiums varies for different tech startups and depends on several factors, such as:
- The number of customers you have
- Annual revenue
- Number of employees
- The area where you operate
- The industry you work in.
What types of insurance do tech startups need?
There are different types of insurance policies to choose from, and deciding what to buy can be overwhelming. The insurance your tech startup needs depends on the various risks you’re exposed to.
To determine the right types of policies, consider working with a reputable insurance broker that has the expertise and experience in assessing risks for tech startups. They will be able to identify potential liabilities and recommend the policies that fit your requirements.
In general, here are several types of insurance to consider:
- General Liability insurance – A legal requirement in most states, General Liability protects a startup against claims that are related to third-party bodily injury or damage to property as a result of your operations.
- Commercial Property insurance – If your business has physical assets and suffers property damage or loss, this policy will help you recover. It covers not only the physical building or office but also assets like office furniture and computers.
- Workers Compensation insurance – This policy is usually mandated by state regulators as soon as you have an employee on the payroll. Workers Compensation covers medical and rehabilitation expenses as well as wage replacement in case your employees get injured or sick as a result of doing their job.
- Errors & Omissions (E&O) insurance – This professional liability insurance is designed to protect startups against claims related to a mistake or oversight that leads to a loss on the part of your client. This is a good risk management tool to protect your business from costly lawsuits and is highly recommended for tech startups that focus on providing professional client services.
- Directors and Officers insurance – This policy protects your startup against significant financial losses from lawsuits against key executives and managers in your company. It covers claims that result from actions that are taken by key personnel as part of their work responsibilities. This policy may be required by venture capital firms when closing a funding round.
- Cyber Liability insurance – Some people think that hackers target large enterprises only. The reality is, hackers are everywhere, and a single data breach can ruin a startup. It’s important to protect your startup against financial losses due to claims related to cyber-attacks with Cyber Liability insurance. It covers claims and damages that result from cyberattacks.
Choosing the right insurance for your tech startup can be daunting but the bottom line is, make sure that your startup has adequate coverage. Even a single claim can mean significant financial losses, as well as damage to your startup’s reputation. Do your research and check the offerings of several insurance companies. You need one who is an expert in risk assessment and recommending customized solutions based on the needs of your startup.
Author Bio:
By Emily Lazration, CoverWallet
Emily is the Senior Content Marketing Specialist at CoverWallet, an Aon company, an insurance technology company dedicated to making commercial insurance simpler, faster, and more convenient for small businesses by leveraging data science, design, and state-of-the-art technology. She has written for several outlets including Inc., Ooma, and Fundera covering small business news and advice.
