Insurance for businesses and commercial enterprises has come a long way over the past few decades. Corporations are increasingly demanding higher coverage insurance products to safeguard their business's longevity and maintain compliance with regulations.
Commercial Insurance has not only become indispensable for large and well established businesses, but also for those that are just entering the commerce ecosystem– startups.
Startups function in dynamic environments where they have to grapple with a number of risks- depending on the industry, location, condition of the economy, capital, and other influencing factors. To sufficiently manage these risks, they need to back their growing day to day operations with insurance policies that can provide them with the right safety and security.
Let’s take a look at some essential insurance policies most startups need:
A General Liability Insurance policy helps your business cover instances of accidental injury, death, or property damage caused to a third party, such as a customer, service provider, or consultant. This policy reimburses you for any losses incurred while battling third party lawsuits and paying compensation to claimants.
Every startup or small business needs to have this basic insurance policy to protect themselves from mishaps or accidents occurring in the business premises or due to business activities. You can get coverage for legal costs, medical expenses, and any payable damages to a third party. Furthermore, this type of insurance can also cover claims of personal injury (libel or slander), copyright infringement, and product deficiencies.
Professional Indemnity Insurance, also known as Errors and Omissions Insurance, protects professionals like accountants, lawyers, service providers, and consultants from any claims of negligence, malpractice, or wrongdoing made by their clients.
This type of insurance is necessary for professionals and businesses offering their services as products, since such claims are not covered by general liability insurance. Here, you will be indemnified for defense costs and any court-ordered damages or compensation payable to the claimant.
Commercial Property Insurance provides coverage for any loss, destruction or damage to your business property, such as its building, office structures, stock, furniture, plant and machinery, computers, office equipment, and other physical assets. Business Property Insurance is further divided into different types of insurance policies such as Fire Insurance, Contractor’s Plant and Machinery Insurance, Marine Cargo Insurance that each cover a specific set of risks common to certain kinds of businesses.
These policies will protect your commercial property against a number of perils like natural disasters including floods, earthquakes, and storms, fire, theft, burglary, malicious damage, material damage due to accidents, riots or strikes, and several others.
Workmen's Compensation Insurance, now better known as Employee Compensation Insurance, helps businesses cover any accidents occurring during working hours that result in death or disability of their workers or employees. This policy also covers medical expenses, lost wages, and payable compensation to the worker’s family in the event of major illness, injury or death.
In India, Workmen's Compensation Insurance is mandatory as per the Workmen’s Compensation Act, 1923 for businesses who employ more than 20 workers. Earlier this insurance was only applicable to manufacturing units, however, in recent years it has been renamed to the Employee Compensation Insurance, now covering employees of other areas including corporates and SMEs.
Directors and Officers (D&O) Insurance covers your business's legal liability from any civil or criminal lawsuit levelled against your senior company officers or managers for any wrongdoing or negligent acts conducted in the course of their employment.
Here, the personal losses suffered by company directors and officers are covered. Additionally, any defense costs or payable damages can also be reimbursed by the insurer.
D&O Insurance is not mandatory in India by any law or act, but remains a critical insurance policy to include in a startup’s risk management program. Because of the grave negative impact directors’ and officer’s misconduct can have on a startup’s potential for growth, investors and funding institutions find it favorable when such a policy has been taken.
Startups these days cannot defer getting insured to a later stage in their business cycle. Creating a pool of commercial insurance policies as a tool to manage risk can have substantial contributions to a startup’s long term sustainable growth, regardless of its current size. An insured business not only showcases your ability to think long term but also attracts future investors and employees to work with you.