Business insurance for startups: Why? Insurance can help you protect your business from disasters, from employee mistakes to natural disasters. We tell you what insurance companies can offer entrepreneurs.
Starting a business inevitably comes with risks. Entrepreneurs, especially beginners, cannot always predict their results. All risks can be divided into two groups: external and internal. External risks have nothing to do with the company’s business processes. These include:
- increased competition risks;
- change in economic situation;
- man-made disasters;
- natural disasters;
- socio-political factors;
- legislative changes.
Internal risks are directly related to the activities of the organization, so the entrepreneur can avoid some of them. These include:
- production risks (equipment failure and its downtime);
- business risks (loss or damage to goods in transit);
- financial risks (non-fulfillment of obligations to banks, for example, failure to repay a loan);
- human factor (erroneous decisions of employees).
Business insurance against risks will help minimize losses. According to the provisions of the contract, in the event of an insured event, the insurer will undertake to compensate for the damage.
For startups, how to choose business insurance services?
To understand which insurance products are right for a company, you need to answer three questions:
- What risks does the business face?
- What is the probability of each happening?
- What will the consequences be and what costs will it entail?
After analyzing the situation, contact the insurer’s representative with a summary of the organization. The advantages of modern insurance are in a wide variety of products, among which there is a chance to find the best.
For startups “What does business insurance cover?
It is difficult for a novice entrepreneur to calculate the risks that could harm his company. Also, each field has its own. But there are typical situations that any businessman can face: flood and fire, theft and fraud, production interruption and breach of contracts by partners.
Everything that can be damaged in the event of force majeure: equipment, goods, facilities. For example, transport is insured against theft, expensive equipment is insured against theft, warehouses are insured against fire.
If your partners do not meet their business obligations and it is not your fault, insurance will cover the damage. It can protect you from losses caused by a forced interruption in production. And even foresee a risk such as loss of profits: if you planned to generate income, but due to circumstances (not up to you) you did not earn anything. In addition, this type of insurance can protect your business from economic shocks in the country – it all depends on the contract and the insured events specified in it.
Professional liability insurance provides protection against unexpected costs should your business or employees harm others. Professional liability insurance is required by law in some areas, for example tourism, transport and production in hazardous facilities. You cannot open a business in these areas without insurance.
Hazardous production, private security company or detective agency – if this is your thing, it makes sense to insure employees against accidents.
How to get business insurance for a business for startups?
Determine what risks your company and your business are exposed to. Use common sense if possible – consult with more experienced entrepreneurs in your field. Maybe there are typical events that can cause losses in your business, but you still don’t know about them. Find the right offer. Typically, insurance organizations offer ready-made packages for small business insurance. Often, these packages cover not only property, but also key business risks. If there is no suitable offer, create your own. You can make a personal contract. True, such insurance will cost more than a standard package.
Find out exactly what is considered insured. For example, fire insurance may not cover spontaneous combustion of machines or short circuits. Theft and embezzlement are different crimes. If you insure expensive equipment against theft and a scammer tricks you, you won’t get insurance. Because the actions of scammers are called theft. The definition of insured is always specified in the contract. Be careful.
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