While startups could be defined in many ways, one could say that the goal of a startup is to create a new product or a new service to disrupt an existing market. Startups are looking to grow quickly and scale their ideas. They will work like any other companies however their business model and organization can change more rapidly. From the initial minimum viable product (MVP) to the final version, startups go through many phases in a short period. During these different phases, do startups need business insurance? We have compiled below some necessary information to answer the question
I – What type of business insurance?
Business insurance helps protect the investment entrepreneurs made in their business and mitigate the risks they are facing. It can also help provide financial benefits to their employees if they get hurt or sick from their job by providing employees benefits programs.
In most countries, insurance policies are optional. However, some countries may require companies to buy certain coverages. As instance, employees’ compensation insurance in Hong Kong or workers’ compensation in Singapore are mandatory.
What business insurance does a startup need? The answer is not straight forward and one size does not fit all startups. The insurances needed depend on the type of business, its size, the market where you are selling your services/products. In this previous article, we have put together an overview of the types of insurance policies that startups should know about. To simplify, we could breakdown 3 types of insurance:
- Property damage insurance, marine cargo or cyber insurance protect the assets of the company
- General/Public liability, product liability, cyber liability or professional indemnity to insure the liability toward third parties
- Keyman insurance and employees benefit insurance for the staff
II – What are the reasons why startups should buy business insurance?
First, insurance can be legally required. As we mentioned above, if you start hiring employees’ in Hong Kong and don’t buy employees compensation insurance, your company is liable on conviction to a maximum fine of HKD 100,000 and imprisonment for 2 years.
Besides the legal requirements specific to the country where your business is located, a contract with a supplier or a distributor or a principal might include some insurance requirements whereby your company will have to purchase a certain type of cover. Most of the time, it is about professional indemnity insurance, product liability insurance or cyber insurance.
Lastly, if an incident occurs, without insurance, you could be liable to pick up the expenses out of your pocket. This doesn’t just include legal fees and compensation, but also any fines, losses from business downtime and replacing any stolen or damaged items. And worst could happen, if the event is a catastrophic one, your company could be out of business.
Last but not least, if your startup is in the tech industry, you could be a target for hackers.
III – How do I choose the right insurance?
At Clema Risk Solutions we have hundreds of startups of all sizes in our portfolio. Thanks to this experience, we will help you find the appropriate insurance for your business. Depending on the company size and industry, it takes us 1 to 3 days to find you the appropriate cover once we have all the necessary information.
Contact us if you have any questions regarding your business insurance or visit our website.
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