Negosentro|Due to the racy nature of the startup world, entrepreneurs don’t often take cognizance of the Business Insurance Basics that are essential for the protection of their budding companies. Having an insurance policy with a particular company does not mean it is the right one, nor does it mean that the policy adopted is being handled properly. Insurance must be perceived as a company’s legitimate asset to avoid corporate casualty. That said, entrepreneurs are advised to identify with five forms of insurance coverage including:
Comprehensive General Liability (CGL) Insurance
In most cases when a claim is alleged against the company’s assets, CGL protects it from:
- Personal property
- Bodily injury to third parties
- Damage to properties
- Advertising injuries
The laudable aspect of CGL insurance is that it mandates the insurance company to foot the bills of a company’s legal proceedings the moment claims are alleged. In any event, permission is granted to allow you select your own counsel with the company’s consent – regardless of whether it is culled from the list or not, in order to eliminate possible conflicts of interest.
It is noteworthy to understand that the CGL policies have taken giant strides to prevent coverage through an expanding list of exclusions and conditions. Depending on the state laws in practice, insurance policies usually require a notice of claim or loss as soon as they occur. You can always withdraw your notice if the case doesn’t go any further.
In lieu of this, given that there is a requirement of $1 million in CGL coverage before executing service contracts, even if you don’t want such a level of protection, you’ll need to buy insurance anyway.
Directors and Officers (D$O) Liability Insurance
Whether or not you have renowned members on your board or committee who are willing to help your company grow, some of them insist on exclusion from litigation involving their business decisions. For startups in this regard, a Side “A” D&O coverage protects officers and directors from claims of wrongful acts which have the company’s value negatively.
For Side “B” coverage, the director or officer is indemnified from paying for defence and indemnity charges as a means to protect the company. The insurance company handles this.
Side “C” protects the company when confronted with shareholder or class action suits on securities issues.
Where there are limited resources, companies prefer Side “A” and “B” These policies exclude verdicts and judgement where the individuals involved were dishonest, engaged in fraud, acted based on self-interest or knowingly violated the law.
Due to the rise of sophisticated hacking in the business world, there’s a need for cyber insurance. Sadly, no standard cyber policy form exists. The business world brims with various insurers’ policies that specify untested terms, conditions and dictates.
These categories of policy cater to defence and indemnity like the coverages explained above. They render other services such as services for compliance with regulatory notice, requirements of disclosure and in the event of an incident, crisis management.
This lack of a definite form for policies requires that one takes precautionary measures. Insurers have continued to resist invitations from companies that are yet to apply or adopt a standard method of securing data. This comes on the heels of the government’s continued efforts to enact watertight policies and regulations Business Insurance Basics
First Party Property Insurance
The essence of this policy provides coverage for damages done physically to a company’s property. The most suitable coverage is the “all-risk” type which covers un-included damages to buildings and equipment Business Insurance Basics
This particular insurance is essential for startups that possess important infrastructure and it is in the best interest of tech companies to buy it. It prevents damage from befalling the servers themselves. For instance, an entrepreneur can adopt a business interruption coverage due to losses accrued from downtime spent in replacements and fixing of a company’s equipment or implements. Some of the exclusions in these policies are property loss as a result of a breakdown in equipment or machinery and gradual wear of such instruments as well as Business Insurance Basics.
Employment Liability Insurance
This type of insurance ensures that the insurer foots the defence of a startup. It differs from the workers’ compensation insurance required by all states and can be bought in a package along with workers comp or the D&O coverage. This coverage is ideal for startups with the intention of employing experienced professionals and employees. The reason is geared at avoiding discrimination claims bordering on gender, race, religion and sex amongst others. They have been known to be rather expensive in litigation Business Insurance Basics
If you’re unsure which insurance coverage suits your startup the most as an employer, head on to Talisman Casualty for a more detailed guide on Business Insurance Basics.