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Startup business insurance can protect your startup from a variety of threats, such as property damage, lawsuits, theft, vandalism, cyber attacks, and employee injuries. By investing in startup insurance, you can manage your startup’s risks and increase its chances of success.
Before You Dive In:
- Startup business insurance can protect your startup from a variety of losses it may face.
- There are many types of startup insurance policies like general liability insurance, professional liability insurance, and business income coverage.
- To land the best deal on startup business insurance, shop around, bundle your policies, look for discounts, and increase your deductible.
What is Startup Business Insurance and Why is it Important?
Startup business insurance is designed to protect your startup against unexpected threats, like lawsuits, theft, data breaches, and other events that may disrupt or even damage the venture you’ve worked so hard to build.
The types of startup insurance you’ll need will depend on factors like your location, industry, and business model.
Oftentimes, however, startups will be required to purchase workers’ compensation insurance and general liability insurance. You may also choose to invest in optional insurance policies to enjoy additional peace of mind.
List of Startup Business Insurance Types
Here’s an overview of several of the most common types of startup business insurance you may consider.
General Liability Insurance
Also known as commercial liability insurance, general liability insurance covers injuries and accidents that may occur on your premises, property damage, and non-physical personal injuries.
Professional Liability Insurance
Property liability insurance is intended to protect businesses that offer professional services like healthcare, accounting, and architecture from claims their clients may file.
Business Income Coverage
Business income coverage or business interruption insurance protects against lost income and operating expenses in the event of a disaster such as a flood or fire strikes and requires your startup to temporarily shut down.
Commercial Property Insurance
Commercial property insurance protects your startup's equipment and other physical assets like its building, inventory, and tools from financial losses that arise due to incidents like theft or a fire.
If you're specifically interested in securing your company's valuable equipment, you might like to learn more about equipment breakdown coverage.
Workers’ Compensation Insurance
Also known as workers’ comp, workers’ compensation insurance, which is required in every state except for Texas, provides benefits to your employees if they suffer from a work-related injury or illness.
Commercial Auto Insurance
Commercial auto insurance is a lot like personal car insurance in that it protects your startup’s vehicles (cars, trucks, and vans) from property damage, medical expenses, and legal bills after they’re involved in an accident.
Data Breach Insurance
Data breach insurance is exactly what it sounds like: insurance to safeguard your startup against losses from data breaches, viruses, ransomware, and other cyber attacks that are common in today’s digital era.
Commercial Umbrella Insurance
Commercial umbrella insurance helps cover claims that exceed the limits of certain liability policies, giving your startup an extra layer of protection and security.
Employment Practices Liability Insurance
Employment practices liability insurance shields your startup from employee claims related to discrimination, wrongful termination, sexual harassment, and negligent evaluation.
Business Owner’s Policy (BOP)
A business owner’s policy or BOP pairs two important policies (general liability and commercial property) into a single policy to protect your startup from some of the most common risks.
Hazard insurance helps safeguard your startup’s building, tools, equipment, furniture, computers, accounts receivable, important documents, and other physical belongings that may get damaged in an event like fire, theft, or a windstorm.
Flood Insurance for Startups
If your startup sustains damage from a flood, commercial flood insurance can kick in and cover the costs to repair your electrical and plumbing systems, appliances, carpeting, cabinets, windows, foundation walls, and more.
Business Travel Insurance
Business travel insurance may come in handy if you’re traveling for business purposes and experience a flight delay, lost luggage, illness, or other unexpected roadblock.
How Much Does Insurance Cost for Startup Businesses?
The cost of startup business insurance varies greatly. It will depend on factors like the size of your startup, the industry you’re in, and the types of products and services you offer. Of course, the types of required and optional insurance policies you choose will also play a role in your overall cost.
In general, however, startup business insurance may run you anywhere from $600 to $5,000 per year. If your startup is in a low-risk industry, like consulting or social media marketing, for example, you’ll likely pay on the lower end of that range. But if you’re in a higher-risk industry such as law, construction, or healthcare, you can expect more expensive startup insurance costs.
Tips on How to Lower Insurance Costs for Startups
Fortunately, there are several ways you can save money on business insurance for your startup, such as:
- Shop Around: Costs vary from insurer to insurer. Do your research and get quotes from multiple insurance companies. Then, compare your options to hone in on the most affordable policies for your unique startup.
- Bundle: Most insurance carriers will reward you with a discount if you purchase multiple policies through them. For example, if you invest in general liability insurance and commercial property insurance, you can score a great deal on a business owner’s policy or BOP. Depending on the insurer, you may be able to add other policies to a BOP, like business interruption insurance and save even more.
- Increase Your Deductible: Your deductible is the amount you’ll pay out-of-pocket before your insurance company will cover a claim. By increasing your deductible, you may be able to lower your insurance costs. Just make sure you feel comfortable with higher out-of-pocket costs.
- Look for a Group Policy: Some insurance companies offer discounts for startups in a similar industry. For example, if you’re in engineering, you may be able to join an engineering association and take advantage of a group discount.
- Pay in Full: If possible, you may want to pay for your insurance policies in full rather than in installments every month or quarter. This is an easy way to save a bit of cash.
How To Apply For Startup Business Insurance
If you’re interested in startup business insurance, follow these steps to apply.
- Consider Your Risks: First and foremost, think about the risks your startup may face. Depending on your industry, these may be property damage, cyberattacks, bodily injuries, and lawsuits from unhappy clients. This can help you determine which policies you want to purchase.
- Do Your Research: Next, explore various startup insurance policies from various insurers. General liability insurance, professional liability insurance, workers’ compensation insurance, and business owner’s policies are good places to start.
- Complete the Application Form: Once you figure out which policies you’d like to invest in, it’s time to apply online or through an agent, depending on the insurance company. Be prepared to provide the following information on your application:
- Business name
- Number of employees
- Business assets
- Estimated annual revenue
Finding the Right Insurance Coverage for Your Startup
Here are some insurance companies you may want to explore as you search for startup business insurance.
Allianz offers business insurance for startups in all industries. Some of its specialty options are aviation insurance, energy and construction insurance, entertainment insurance, marine insurance, and financial lines insurance.
You can work with an Allstate agent to find the ideal coverage for your startup. Its lineup of policies include business owners policy (BOP), property coverage, liability coverage, business interruption coverage, and equipment breakdown coverage.
Clear Blue Insurance
Clear Blue Insurance is a property and casualty group. It offers a diverse selection of policies, such as business auto insurance, commercial umbrella insurance, crime insurance, cyber liability insurance, and farm insurance.
Farmers Insurance provides property insurance, liability insurance, crime insurance, auto insurance, workers’ compensation insurance, umbrella insurance, and loss control insurance. There are also other offerings for startups in specific industries, such as auto service and repair, manufacturing, retail, wholesale, and food services.
Acuity’s insurance options include general liability insurance, commercial auto insurance, workers’ compensation insurance, property insurance, excess liability insurance, and cyber insurance. It serves startups who are contractors, wholesalers, distributors, truckers, retailers, restaurants, hotels, auto repair shops, and more.
CNA’s list of insurance policies for startups includes commercial auto insurance, general liability insurance, property insurance, marine insurance, cyber insurance, and workers’ compensation insurance. It focuses on the following industries: construction, financial services, health care, law, life sciences, manufacturing, professional services, real estate, and technology.
Frankenmuth Insurance serves startups and small businesses with commercial auto insurance, workers’ compensation insurance, commercial umbrella insurance, cyber insurance, and more. Its client base includes contractors, manufacturers, real estate investors, wholesalers, and distributors.
Travelers offers general liability insurance, property insurance, cyber insurance, commercial auto and trucking insurance, workers’ compensation insurance, and small business owner’s policy insurance. You can work with an agent to determine the ideal policies for your startup.
Chubb’s insurance plans for startups umbrella and excess casualty insurance, workers’ compensation insurance, property insurance, professional liability and insurance. Product recall and medical liability insurance are available as well.
Westfield Insurance provides customized solutions for startups in industries such as healthcare, real estate, manufacturing, and hospitality. You can work with a Westfield Risk Control Representative to learn about the unique options for your startup.
State Farm’s startup insurance selection consists of commercial auto insurance, business owners policies, workers’ compensation insurance, commercial property insurance, and builder’s risk insurance. You can reach out to an agent for assistance.
Nationwide specializes in insurance products for startups in industries such as auto service and repair, consulting, contracting, food service, photography, retail, and wholesale. Several of its solutions include business owners policies, business liability insurance, commercial property insurance, commercial auto insurance, and workers’ compensation insurance.
Liberty Mutual serves startups in construction, manufacturing, healthcare, private equity, energy, and many other industries. Several examples of its insurance products include umbrella insurance, commercial auto and fleet insurance, equipment breakdown insurance, and inland marine insurance.
Tips To Keep In Mind When Applying For Startup Business Insurance
As you apply for startup business insurance, keep these tips top of mind.
- Determine Your Required Policies: While many insurance products are optional, some are required. Your industry, state, clients, and lenders may make certain policies mandatory. Workers’ compensation, for example, is must-have insurance in every state except for Texas. Do your research and figure out what startup business insurance you must purchase.
- Understand Your Risks: Your risks will depend on your industry and the nature of your business. If you’re an accounting startup, you may worry about being sued for making a mistake on a client’s tax return. If you own a food truck, however, your concern may be customers becoming ill after eating your food. Knowing your risks will make the insurance shopping experience much easier.
- Overestimate Your Needs: It’s better to be over prepared than underprepared, especially when you’re a startup and haven’t been around for very long. Since a lawsuit can destroy your venture, it’s better to buy more than the minimum types of coverage and coverage levels you may need.
- Choose Highly Rated Insurance Companies: Not all insurers are created equal. That’s why it’s important to look for providers with good reputations, such as Farmers, Travelers, Nationwide, and the other options we listed above.
- Ask for Help: If you’re unsure of which policies you need or would like some guidance as you shop for and apply for startup business insurance, don’t hesitate to reach out to an insurance agent. Ideally, you’d consult an independent agent who represents many insurers.
Business Mentoring Organizations That Could Help
These business mentoring organizations can benefit you as a startup.
- SCORE: SCORE is run by the U.S. Small Business Administration (SBA). It offers free mentorship programs for startups, entrepreneurs, and small business owners. There are SCORE chapters throughout the country.
- Chamber of Commerce: By joining your local Chamber of Commerce, you can enjoy access to networking events, professional development workshops, and special discounts. You may also get to promote your offerings at local conventions and trade shows.
- Entrepreneurs’ Organization: Also known as EO, the
Entrepreneurs’ Organization has been around since 1987. It can help you connect to mentorship. programs, learning platforms, and industry experts.
- StartupNation: Startup Nation was developed for entrepreneurs by entrepreneurs. You can connect to other startups and receive valuable advice on how to run a small business.