Starting a new business is exciting, thrilling and confusing! Trying to figure out what type of insurance coverage your startup venture needs can be overwhelming. We outlined various types of coverage that can help you decide what insurance you need to get started. Hint: you can always increase your insurance lines once your company has become more established.
General Liability Insurance
Most businesses have a GL insurance policy because of the broad coverage it offers. As much as you try to plan for every possible scenario, problems will arise that you couldn’t have predicted. Although it’s also known as Slip-and-Fall insurance, General Liability covers a whole lot more than that. Bodily Injury, Property Damage, Personal Injury and Advertising Injury limits provide coverage for claims caused by situations in which physical or emotional damage occurred.
A BOP is a Business Owner’s Package Policy and a cost-efficient insurance solution for certain business types. BOPs consist of Property Insurance, General Liability and Business Interruption Coverage. They do not cover autos, Worker’s Compensation, E&O, or any group insurance. BOPs aren’t a fit for every business as the coverage is pretty standard. Many industries, however, find that a BOP policy combined with some additional products offers the peace of mind they need. The policy will be adjusted in order to meet a specific business owner’s needs.
Most states require Workers Comp. insurance for any business with one or more employees. WC is based on payroll and job roles/functions, but the type of industry classification will also play a part in calculating premium. For example, a roofer typically has a much greater chance of becoming injured while at work than an office clerk. Another sore point re: Worker’s Comp. is that in NJ pretty much all new businesses will go into the State WC Plan for at least 3 years because they don’t have a claims history, and the state plan has fees that increase the premium amount. However, some carriers will write new WC policies if they have the BOP or GL, too. Finally, it is worth considering that NOT having WC insurance is a huge risk. Ending up with an injured employee without coverage is going to cost you far more than the WC policy.
Cyber Liability Insurance
Data Breach and Cyber Liability are huge buzzwords these days, but with good reason. With a strong emphasis on businesses to be present online, and with rules about privacy becoming more stringent, there is much greater room for error when it comes to protecting personal information. You may think only large, corporate companies are at risk from a cyberattack/data breach, but that is not the case. Phishing, skimming, malware…there are so many ways for cyber criminals to try and get your data. And it’s not personal – they throw out these nets every day just hoping to slip under someone’s radar. And you know who’s usually not watching for them? New or small businesses who don’t have the time or manpower to detect them. That’s not even touching upon careless or opportunistic employees that can intentionally or unintentionally compromise your protected information….
Employment Practices Liability Insurance (EPLI) is another coverage you should consider if you have employees. From the moment someone walks through your door until an almost infinite period of time thereafter, you are at risk from an employment-related claim. Any number of things could trigger a lawsuit. For instance, harassment, wrongful termination, discrimination, and emotional distress to name a few. No other insurance policy can provide the type of coverage needed for an EPLI claim. And with defense costs averaging $65,000 nationwide (assuming it doesn’t go to trial!) make sure you have a backup plan if you don’t have EPL insurance.
Vehicles registered to an LLC or Corporation, transporting goods, and driving for work (as opposed to just driving TO work) are just a couple of instances that justify purchasing a commercial auto policy. Commercial Auto coverage extends to items or scenarios that a personal auto policy typically does not cover. Typical personal auto policies have an exclusion for business-related claims. For example, an employee is dropping off posters he made for a client. He is using his own personal car and he causes an accident. When it comes out he was driving for work related purposes the personal auto policy has the right to deny coverage because he was using the vehicle to make a business delivery and there’s a business exclusion on the policy.
Errors & Omissions Insurance, also known as Professional Liability, helps protect professional advice- and service-providing individuals and companies from bearing the full brunt of defense costs and/or damages awarded in negligence-claiming lawsuits. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a general liability insurance policy.
There are exceptions and endorsements that are unique to each business. Use this as a starting point when trying to figure out what insurance is out there and what you might need to get started. We would love to go over your options, answer your questions, and help you get your dream off the ground – at least as far as the insurance goes!