Business Insurance: Which Coverage Do You Need?

  • With little to no money as a startup, you may ask yourself the question "do I need business insurance," but it's obvious that you do.
  • Consider the possibilities of legal questions and battles. Would you be able to pay all the fees that are associated with them (lawyer fees, court fees, etc.)?
  • There are several business insurance coverages that you'll have to consider purchasing if you don't want to fail.

business insurance

The fewer available funds you have, the more you need business insurance.

This is especially the case for startups. It can be exciting and thrilling to begin a new journey, especially for someone who has been in a working environment for a while and decides to take a leap of faith to be totally on their own. But as exciting as it is, being in a new business comes with nitpicky decision-making on a day-to-day basis. For some, it can feel like fire-fighting, but nothing increases the stress and anxiety that comes with it more like feeling that your financial security is being threatened. The emotions that follow will turn your logical reasoning illogical.

So why is it that the fewer available funds I have, the more I need business insurance? And what if I do not have the funds for it? Then my best advice to you is not to start your business till you have such funds.

So again, the question is why?

It's plain and simple. Ask yourself the following questions, and you’ll have the answer:

Which is easier to manage?

  • A fixed, consistent amount of expenses;
  • A sudden unknown expense with no limits.

Which is more exciting?

  • Fixed income month to month;
  • A sudden huge influx of income.

Which is a better situation to plan your business expenses

  • A steady, predictable revenue;
  • Unknown date on when will revenue come in.

Business insurance for startups is extremely crucial

Imagine you are a company selling services. If there is a lapse in the service, think of the damage that it can cause your clients. Those damages will be brought upon you as the owner.

So, what happens next? Damages will need to be paid. But will that incapacitate your ability to continue your business functions? And aside from the business aspect, have you also thought about if you will be able to stand against another challenge again emotionally, mentally, or even financially? Will you be able to sustain such a blow and start all over again?

You may argue that the damage is not your fault. That’s great news! However, while you prove your innocence, how many legal questions and battles do you think your funds can sustain? And if you win, did you also consider the fact that the other party may not have the funds to cover a legal battle (just like yourself, they lean on funds too)?

What kind of business insurance do I need?

So how do you avoid all these issues and still have peace of mind while establishing your business, knowing you can be covered against such unwanted “excitement” in business?

If your business is in the production of goods, you’ll especially want a small business public liability insurance coverage. It covers damages arising from the usage of your products, as well as other public liabilities such as injuries sustained within your premise of operation.

Consider this example: a company newly invested a patented car lubricant. Since it is new and only recently brought into the market, there is still a great unknown factor on how the lubricant will react during actual usage despite lots of testing. Even if deemed safe, if a car exploded and caused injury to passengers or properties, and the root cause was found due to the lubricant that you supplied, legal letters will be bound to arrive at your doorstep.

If you are someone giving professional advice like doctors, lawyers, tax advisors, etc. you will need a professional indemnity insurance. You need this is in case due to your advice, a client suffers damage and wishes to seek losses from you. This ensures that you can still operate while fire-fighting in court.

Having such business insurance in place gives you a better financial blanket so you can continue to operate without fretting on additional unpredicted money outflow. Not only does it help your business, but it also secures your family and friends since you will not need to borrow money from them. It will also allow you to continue your business, stand firm in what you believe in, and have business insurance to tie you over during the down period.

Having it also makes you a wise and responsible business owner who knows not only how to generate business but how to secure and protect it.

Do you have a business insurance for your company?


Joanna Leng

Joanna Leng

Financial Adviser who loves to create and built DIY projects and injects her creativity to provide solution to her clients. Writes and contributes on weekly basis. Author of an upcoming book. Founded www.astoryforher.com


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Jef Lippiatt

Jef Lippiatt , Owner at Startup Chucktown

This is definitely a topic that doesn't get as much coverage as it probably should within the business community (especially startups).