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5 Types of Insurance Every Startup Owner Should Know About

5 Types of Insurance Every Startup Owner Should Know About

Startup owners should protect their new business in every way, shape, and form possible. If one little thing goes array, you can damage your entire sales forecast and set back your projected revenue growth. Delayed income could cause you to be late on your loan payments, and while you might be able to withstand a few interest charges, that’s only the least of your concerns.

When something big goes sideways—like your store flooding, equipment breaking, or employee getting hurt on the job—the financial issues that come as a result have the potential to completely knock you out of business. Depending on the structure of your business license, you could be sued personally, jeopardizing your personal finances as well as your business funds, or lack thereof.

To avoid this sort of catastrophe from happening, it’s imperative that startup owners get every type of insurance they need to limit their liability. Which industry are you operating in, and which type of corresponding insurance do you need for protection? Take a look at the most common list below.

General Liability Insurance

This type of insurance takes the top of our list because nearly every business owner stands to benefit from this insurance. It doesn’t necessarily make you impervious to lawsuits, per se, but most plans of GL insurance will provide adequate financial coverage should you be hit with a legal claim or settlement.

GL insurance covers a broad range of events including things like:

  • Liability for damage to others’ property in the course of doing business. For example, if you’re a general contractor and you or one of your employees causes incidental damage to a roof while installing a solar system, this type of insurance can provide financial coverage if the homeowner sues your company. As careful as you may be, accidents can still occur and it’s always better to be safe than sorry.
  • Accidents or injuries that happen to you or your employees or patrons that occur on your property or arise from its operations. Despite your most diligent training, your employee could gravely misuse a piece of equipment while executing a task at work
  • Medical bills for minor injuries sustained by patrons on your company property. Unfortunately, many people are known for committing the classic, money-grabbing “slip and fall” act—to which young startups are especially vulnerable. Without this insurance in place, you could be forced to make expensive payments toward phony claims.

Property and Casualty Insurance

Stay up-to-date with P and C trend reports to understand why this type of insurance is so important for startup owners. Many budding entrepreneurs work from their home office before eventually expanding into an office space. Property insurance covers items you own, such as your home or car, while casualty insurance provides liability coverage for damage to other people’s property that you’re found legally responsible for.

Say, for example, you’re in the business of vinyl wrapping cars with custom finishes and operate out of your garage at present. Your equipment malfunctions, and you not only dent your customer’s car, but create a hole in the wall as the equipment backfires out of your hand. Most P and C policies would provide financial coverage for both incidents.

You can usually find P&C plans bundled into one insurance policy such as:

  • Car insurance
  • Homeowner’s insurance
  • Rental insurance
  • Landlord insurance

Property Insurance

Once you make it out of your home or garage and transition into a storefront or office space, it’s wise to invest in property insurance. These policies cover a broad span of physical accidents including:

  • Vandalism
  • Fire
  • Smoke
  • Windstorm
  • Hailstorm

Flood Insurance

Unfortunately, flood damage is excluded from most property insurance policies. You might want to consider commercial flood insurance depending on if you live in a particularly rainy region at or below sea level or not. Flood insurance is always a good way to cover all of your bases because you can never predict when your upstairs neighbor might have a leak, or a damaged pipe suddenly explodes.

Errors and Omissions Insurance

E and O insurance (also known as professional liability insurance) protects your startup against claims that the advice or recommendation you provided caused your client to suffer financial harm due to errors or omissions on your behalf. This could come in handy if you ever have to face clients who are disgruntled by a poorly performing investment portfolio.

Insurance might cost a bit upfront, but it has the potential to save you a substantial amount of money in the end—be smart and insure your startup!


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by Dirk DeBie // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.