Business Insurance 101: Policies You Need for Every Stage of Growth
For many entrepreneurs, commercial insurance is not top-of-mind. With so many things to take care of, from day-to-day operations to managing your team and launching new products, it’s understandable that checking your insurance policies might not make your to-do list.
But, the reality is, insurance is an essential investment that every business owner needs regardless of the size, industry, or what stage of operational growth you’re in.
In many cases, business insurance is a legal requirement and a prerequisite for doing business. But aside from being a legal requirement, insurance protects you against huge financial losses due to claims associated with personal injury or property damage. And as your business grows so should your business policies.
A business faces different risks at different growth stages such as buying another delivery vehicle, launching a new product or service, hiring more people, and leasing additional office space. It is crucial to revisit your insurance policies regularly to make sure you have adequate coverage no matter what changes come your way.
So, what are the policies that you need as your business grows? Here are some of the insurance policies to consider for every stage of business growth:
Launching a new product or service
One of the possible risks when you’re launching a new offering is a product recall. A new product on the market can have many problems including tampering, flaws in the design or packaging, contamination, and mechanical malfunctions. A product recall will leave a hole in your pocket and damage your reputation in the industry.
Product Liability insurance is a first-party specialty policy that covers a product and the operational liability of completing a product. This policy can cover instances of bodily injury or property damage caused by a faulty product and will help cover your business against financial losses due to such risks.
Virtually every business has an online presence. The change to eCommerce has become even more rapid due to the COVID-19 pandemic as many businesses pivot to include online purchases. But, handling online transactions means you’re vulnerable to cybercriminals. It’s a common misconception that only big corporations are targeted by hackers, but the reality is that almost 40% of data breaches target small businesses. A single cyber-related claim, such as identity theft or a data breach, can cost you thousands in lawsuits or settlements.
So if you are handling payments online and maintaining a database of customer information such as credit card numbers, make sure to carry Cyber Liability insurance.
Expanding your team
In many states, once you hire your first employee you’ll be required to hold Workers Compensation insurance. This policy will protect you and your employees against work-related injuries and illnesses. Every state has its own Workers Compensation laws and regulations and as your team expands you may be required to update your policy. Always check with local authorities to make sure you’re compliant with these regulations. Failure to do so could lead to penalties and fines.
Once your team starts growing so does your risk of employee-related liabilities, such as harassment and wrongful termination. This is where Employment Practices Liability insurance (EPLI) comes in. This policy covers you, the company, and your employees against claims of discrimination, breach of contract, wrongful termination, retaliation, and sexual harassment.
Keep in mind that this policy does not cover instances of bodily harm or property damage, those instances could be covered under Workers Compensation or Commercial Property insurance. Also, this policy will not cover claims of unpaid wages or civil fines that might be imposed by state or industry regulators.
Purchasing a company vehicle
Because of the pandemic, many businesses are now offering delivery services, which means purchasing commercial vehicles. However, because road accidents are common you need to make sure your investment is protected with Commercial Auto insurance. Even if your employees are using their personal vehicles, you’ll likely still need this policy since many personal auto policies will not cover accidents where the vehicle was being used for business purposes.
Eventually, you may need to create a board of directors for your growing business, this is often the case when securing venture-backed funding. However, having Directors and Officers insurance (D&O) is often a requirement for VC funding. Having D&O insurance protects senior-level executives from claims of wrongful acts committed in the course of doing their job. For example, if your company for allegations of breach of fiduciary duty this policy can cover the legal expenses.
There are three main sides to this policy:
- Side A: Covers individual insureds not indemnified by the corporation
- Side B: Reimbursement to the corporation for indemnifying individual insureds
- SIde C: Securities claims against the corporation
Keep in mind, this policy will not cover claims of intentional illegal acts, such as fraud.
Leasing a new office space
Another tangible sign that your business is continuously growing is when you are opening another office or renting a bigger one. Before anything else, make sure to keep your Commercial Property insurance updated. With this policy, both the property and physical assets such as office equipment and furniture are covered. For example, if your office spaced suffered fire damage this policy could pay to replace lost equipment and files. Having this insurance can give you peace of mind knowing that you don’t have to pay for the damage out-of-pocket.
The key takeaway
You’ve worked long and hard to get your business off the ground so make sure you’re protected with the right commercial insurance. It’s important to keep your insurance advisor up to date on any changes in your company, they can help you determine which coverage options will be best for whatever stage of growth you’re in.
By Emily Lazration, CoverWallet
Emily is the Content Marketing Specialist at CoverWallet, a tech company that makes it easy for businesses to understand, buy, and manage commercial insurance online. She has written for several outlets including Inc., Ooma, and Fundera covering small business news and advice.