What To Insure: A Cheat Sheet for Entrepreneurs
Starting a business is more than developing a reputation of expertise with the product or service your business offers. It involves a lot of administrative work to make sure that your business is secure and running smoothly. One part of that administrative setup is insurance.
Many entrepreneurs hear the word “insurance” and they immediately think of how much money they will be dishing out. It may be tempting to scrimp on insurance to save on the startup costs. Doing that probably makes you nervous, though, because the last thing you want is to be hit with a crisis without insurance coverage.
So, how do you know what to insure? Lucky for you, we’ve boiled it down to a convenient checklist of things you need to purchase insurance for when starting a business.
1. Physical Space
If anyone is injured on your business premises then that opens you up to a potentially very expensive lawsuit. The classic slip-and-fall is a great example of something that could easily bankrupt your business. If your business involves a physical space, that space should be insured. This includes any premises that are owned or leased by the business including offices and retail locations. This insurance doesn’t have to be expensive, it just needs to cover your basics. To save money, check your rental and lease agreements before purchasing insurance coverage for natural disasters and routine wear and tear. If these expenses are not your responsibility then you don’t need to pay to insure against them.
2. Professional Judgment
Malpractice lawsuits are becoming increasingly common, especially for professions that are considered wealthy. If your business involves doctors, lawyers, or anyone else with a professional degree, then you need to have some form of professional liability insurance. Again, the policy limits don’t need to be extravagant when you are first starting out. You should objectively consider the value of a potential lawsuit and base your coverage limits accordingly.
3. Key Personnel
This is one that most entrepreneurs tend to overlook and, frankly, it may or may not be necessary based on the type of business you have. If your business is just something you do for yourself then you may not have to worry about this. If your business needs to function even if you are no longer around, then your key personnel need to be insured. This allows your business to function even if the ringleader is out of commission.
So there you have it. Unless there is something specific to your industry, these three things are the most important things to insure when first starting a business. As your business grows then you can decide if other things are valuable enough to insure as well. When you’re just getting started, though, you want to keep your insurance costs as low and as effective as possible.