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Your Startups Pre-Launch Checklist: Business Insurance (Part 7 of 14)

Business Insurance from the Startup Garage

What Type of Insurance is Right for My Company?

This blog post has been prepared by The Startup Garage for informational purposes only and does not constitute advertising, a solicitation, or legal advice. The information contained in this blog post is provided only as general information which may or may not reflect the most current legal developments; accordingly, information in this blog post is not promised or guaranteed to be correct or complete. The Startup Garage expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this blog post.

Many people think of their startup as more of an individual with a mind of its own than a business and just like a person, your new venture is going to need insurance. It cannot be stressed enough how important business insurance is for your new enterprise, especially in a society like ours where people are so quick to take one another to court. There are many different types of insurance, so in this post we will go over the big three:

  • General Liability Insurance
  • Workers Compensation
  • Professional Liability

What is General Liability Insurance?

General liability is often known as a trip and fall policy because it is for when a third party claims someone is injured. In other words, general liability covers you if a customer slips in a puddle in your store or an employee cuts himself on the job site. Any time someone claims your business caused them some sort of bodily harm, general liability insurance will protect you. Most landlords will require that you get $2,000,000 of coverage with an additional $1,000,000 per accident you have. Make sure you get this from your property manager in writing!

What is Workers Compensation?

Workers compensation is another extremely common insurance most businesses have. If an employee gets injured during the course of his or her work day, this will cover the cost of the injuries and lost wages. If you do business in a state that requires workers compensation, dont try to get out of it. The Department of Industrial Relations can shut you down for not having adequate protection and fine you $1,000 per employee.

Costs vary depending on the state and the type of job the worker performs. Employers of high risk jobs will have to put more aside for workers compensation. For example, in California for every $100 an office clerk makes, his or her employer must set aside $1.25 in workers compensation. In Washington on the other hand, every $100 a sawmill worker makes his or her employer must set aside $2.06.

What is Professional Liability Insurance?

The final insurance we will discuss today is professional liability insurance, also known as Errors & Omissions insurance or Malpractice in the medical field. Basically, professional insurance is for those who give provide services or advice to a customer that is potentially harmful. This type of insurance is especially suited for technology professionals, lawyers and business consultants.

One last thing we forgot to mention: make sure you understand all aspects of the insurance you are getting before you sign any papers. A policy may cover only certain aspects, so make sure you know what it covers and what it doesn’t. The role of an insurance agent is to make sure you are getting the right insurance and understand what you are buying, so be sure to ask them any questions you have.

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Our next post will be on the different banking options that startups have. See you Tuesday!


Whether you have a question about Business Insurance or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

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