December 18, 2014

4 types of insurance your startup is going to need.

Workers Compensation Insurance. Ok, this one is easy. The state pretty much mandates that you have this type of insurance coverage in place once you hire your first employee. It is going to be fairly inexpensive if you consider that you would only be paying for coverage on one employee or perhaps the owners of a company based on how the company is set up to start with.

General Liability. Most people will think of this as the ‘slip and fall’ insurance. It’s true, it is slip and fall insurance, but there is quite a bit more in there which is why general liability would be better described as your ’bread and butter’ insurance. This kind of coverage represents the foundation of protection for your company.

Aspects of this type of coverage include advertising and personal injury. This will cover you if you screw up some of your advertising at someone’s expense. You may slander someone or violate intellectual property such as trademarks or copyrights. Products and Completed Operations coverage is also part of General Liability. If you sell an actual product, this is where your coverage lies if that product were to fail, or if it injured someone. There is of course the ‘slip and fall’ scenario where someone walks in your office and takes a spill because someone dropped a coffee on the floor.

Most of the time, the trigger for this type of coverage for a startup will be a move into a commercial space or the need to settle up with a vendor contract.

Professional Liability. This is where you get a little more specialized. If you work in some kind of services arena or in a technical space, you will likely need this. Professional Liability coverage covers a firm if there was any sort of claim that stemmed from the normal operations of one’s business. Pretty much this is the coverage that would protect your company from damages that stem from a mistake made by you for work done for another party. If an insurance brokers screws up someone’s insurance, that is a mistake that stems from the normal day to day operation of the broker. The act was done within the confines of his or her profession.

This type of coverage extends to all aspects of services, doctors, lawyers, on and on. Technology has its own subset called Tech E&O which specializes coverage around that industry and its specific needs such a cyber and breach protections.

General Liability goes hand in hand with professional. If you only have one, you may have a big gap in your exposure.

Directors and Officers. This is a bit next level, but in this day and age it is becoming more and more of a requirement rather than an ancillary coverage. Directors and Officers coverage covers officers of a firm for damages that stem from actions taken as a matter of management of that firm. A good example is stakeholders of a company taking issue with a strategic direction. If the CEO does X instead of Y and a stakeholder is caused damage, that stakeholder can sue the company officer. Not the company mind you, the officer. That can leave a big personal exposure of you are not protected.

An important component that goes hand in hand with D&O coverage is EPLI (Employment Practices Liability Insurance). It’s become more and more common that lawsuits against company officers don’t come from the outside, they come internally from employees, or more to the point, former employees. Claims such as harassment, discrimination and retaliation are common causes of employment claims where an employee will file suit naming not only a company but also officers.

D&O coverage has become more and more necessary to insulate yourself as an officer of a company. Some feel they don’t need it or it will never happen to them or just don’t see the risk….they would be wrong. It’s a litigious word we live in. Don’t get hung out to dry.

If your a company that has reached any of these points and can use some guidance, feel free to reach out to us, we’re here to help. You can use the form below or contact Nathan Therrien directly at 978-400-7014 or by e-mail at [email protected]


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