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And if business insurance is worthwhile, at what stage should a startup consider purchasing it? After the release of a product or launch of a service? Or is it good to have it in place from the point where you incorporate your business? Most of the advice I've been given says, yes, absolutely -- but it was given to me by folks with offices or other bricks-and-mortar facilities. |
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You've basically got two choices when it comes to insurance: general liability ("slip and fall") and errors & omissions ("negligence"). I've wondered myself if errors & omissions is worthwhile, but General Liability is a "no brainer". If you have your own offices, it's like a few hundred bucks a year for a couple million in insurance. If you have a home-based office, you can likely get a rider to cover your business as well (like, $50/yr). GL will cover the stupidest little freak things that you're liable for: client comes over, plugs in his laptop to your outlet, faulty grounding causes a short, and then he has heart failure. Without GL, your business would be ruined and they might even be able to pierce the corporate veil and go after you. |
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I would advise you to get it and as far as timing, I would advise that you do it shortly after incorporation, before you release information into the wild about your company/product/services. The trouble is that as soon as an event occurs, its too late to the get the insurance after the fact. I have witnessed events first hand that because the company had insurance, a lawsuit that normally would have drained the company's resources, was covered by the insurance policy and therefore had less of an impact. Its bad enough to have to defend yourself in those situations and go through the pains of discovery, motions, litigation, etc.. If your company gets successful enough I would also advise you get insurance for the corporate officers. You should hire an attorney to advise you this before you move forward to make sure you cover all the bases specific to your situation. |
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To be brief: do get it; get it as soon as you can afford it; you'll need it before you ever expect it. |
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As a side note, if you run your business out of a rented home and have renter's insurance, check with your renter's insurance policy on coverage levels and whether they do actually cover your business. Have a look a getting a business owner's insurance policy (referred to as a BOP) to cover your general business liability. Off the top of my head, I can think for Travellers, The Hartford, CNA and AIG for business insurance needs. A local insurance broker would be of better help to you. |
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I'm of the opinion that most insurance policies are scams being peddled by fear mongers. However, if we are to assume that you live in the US, your litigious culture means that the smallest of ridiculous lawsuits can cost sufficiently to put your business (especially a boot strapped startup) under immense strain or even out of business. Based on this alone, it's probably worth it, and any client worth their salt will demand that you have it. |
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If you run a business and have an office, you need business insurance as soon as possible. If you are renting office space, you will be required to have general liability insurance before signing the lease. General liability is so important because it protects your business from people accidentally hurting themselves in your office and suing your company. |
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