Personalised business insurance
Welcome to the second article in our startup series – where we breakdown business insurance for startups including why it's needed, the different types of risks startups face and the types of covers startups need. To view the rest of the series, scroll down to the bottom of this article.
As a fresh-faced startup that’s finding its feet, you might think you don’t need business insurance just yet. But this is exactly why startups should consider insurance from the offset.
New businesses are not immune from claims, and mistakes or accidents are more likely to happen when you're learning and trying new things. Buying insurance for your startup can even have business benefits.
Here we run through what these are, as well as all the other reasons why insurance should be on the to-do lists of all new businesses.
1. You’re trying to impress
Businesses that are just starting out will most likely be trying to win new customers or clients. Especially if you’re a service provider. As such a new business, some clients may refuse to work with you if you don’t have insurance as they want to see evidence that you’re mitigating potential risks.
Clients will often request you have certain policies, including a certain level of professional indemnity or public liability protection. This not only provides necessary protection but could nudge that all-important deal over the line.
2. You’ll be seen as a safer bet with investors
It’s a similar situation with angel investors and VC firms who’ll want to see you’re organised and have considered the risks facing your venture. Core policies such as directors and offers insurance, professional indemnity and public liability will give them extra reassurance that you’re a safe bet.
3. You’re taking more risks
To be a successful startup, there will be times when taking a leap of faith is necessary. And while this is exciting, it does mean the potential for unexpected accidents and incidents is greater.
If something did happen that was out of your control, an insurance policy should be able to help you out.
4. You’re constantly changing
As a result of these risks, you may find that no two days are the same. One decision could change the entire premise or structure of your startup. Choosing an insurance company that allows for unlimited changes to your policy free of charge will mean that your business is always protected for the things it needs to be as it changes.
5. You might be making more mistakes
There’s only so much you can read in books that will help you become the founder of a startup. If it’s actually happening, you’re most likely learning by doing, which leaves you open to making mistakes.
While most of these may be harmless, as a company director, there’s a chance you could personally face claims for wrongdoing, jeopardising your individual reputation and bank balance. If you find yourself in the firing line, directors and officers (D&O) cover is designed to help you out with the legal fees and compensation associated with the claim.
Likewise, if you publish online content, a misjudged blog, tweet or video could see your business facing charges of defamation or making false statements. A policy that includes media liability insurance could be there to pick up the pieces.
6. It might be legally required
This is the same for almost all businesses in the UK – but if you take on your first employees and don’t buy employers' liability (EL) cover, then you could be hit with a fine or even prosecuted for breaking the law. For example, the Health and Safety Executive give you a £2,500 fine for every day you go without EL cover.
If you’re a fintech business, the Payments Services Directive (PSD2) means you have to prove that your PI cover meets the required insurance limit and excess levels. Specialist PSD2 professional indemnity cover (PII) will also protect you against regulatory investigations and defence costs, as well as any penalties that are legally insurable.
7. You’ve not got cash to spare
As a startup, every penny needs to be used wisely, which means there’s no room for mistakes.
If an incident or accident occurred and you didn’t have insurance, you could be liable to pick up the expenses out of your own pocket. This doesn’t just include legal fees and compensation, but also any fines, losses from business downtime and replacing any stolen or damaged.
These expenses can rack up to be in the thousands, if not millions, which could seriously dent your startup costs and make it very difficult for your business to recover.
8. You’re still a target
It might be the big brands that hit the headlines, but SMEs are just as much of a target for hackers, with Government figures showing 42% fell victim to a cyber attack or data breach in the last 12 months. Cyber liability insurance will help you to minimise the damage and costs, and cover any GDPR penalties (where legally insurable).
What’s more, you’ve most likely invested in a bunch of new kit for yourself and your employees, including laptops, smartphones and tablets. That’s why business equipment insurance is a popular choice, so if your gadgets get swiped, dropped or dunked, you can get them replaced hassle-free.
Could you afford not to have insurance?
We’re not strictly directing this question in relation to money, but if an incident did happen could you afford the cost of a claim as well as the potential reputational damage or loss of opportunities?
If we’ve convinced you that buying insurance for your startup is a great idea, you can check out our startup insurance, which offers a tailor-made policy to your business's specifications.
We hope you enjoyed the second installment of this series. To learn more, check out the first article, how to protect your business from startup risks.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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