Common Startup Business Risks
It’s easier than ever to start your own home business. You can connect with any market around the world, and marketing with social media and SEO is more affordable than traditional marketing techniques. However, if you’ve never owned a business before, you might not realize that a startup comes with some risk. Whether you are starting a software as a service business or a painting business, you need to make sure that you are protected from any of the potential risks that you face.
Getting the right insurance is a big step towards this. It will not prevent bad things from happening, but it will help you weather whatever the consequences end up being, from legal costs to medical bills and everything in between. Here are some of the most common startup business risks and how your insurance can help to mitigate them.
If you are planning on taking on staff, then that invariably comes with risk. You are not only responsible for yourself and your business, but you are responsible for other people as well. You have a responsibility to make sure that they are protected while working for you, and if they have to stop working because of an injury or illness related to work.
Workers’ compensation coverage is required in most states. If someone has to miss work because of injury, it will provide compensation for their costs. Those costs can include medical bills, rehabilitation costs, lost wages, and other costs related to the injury. This type of coverage will protect you and them if the unthinkable were to happen.
When you have a staff, there is always the chance that you could get sued by someone. They could allege harassment, discrimination, wornful termination, or other unfair employment practices. Even if you have done nothing wrong or illegal, you can still be taken to court. Employment Practices Liability Insurance provides you with protection against lawsuits of this kind. It will cover your defense costs and any damages awarded to the employee.
If you are releasing a new product into the market, you will have some risks with it. It could have defects, or something could cause injury. If your products are manufactured in a country with less stringent regulatory regimes, then it could have health and safety concerns that you are not aware of. Unfortunately for your business, especially as a startup, you could find yourself sunk before you really get going.
If you have a product that causes harm or even property damage, you could find yourself facing several lawsuits. Not to mention you may have a massive public relations disaster on your hands as well. It’s important to act quickly in these situations to make things right. Product liability coverage will help protect you against manufacturing mistakes, defects, labeling errors, tampering and other actions that could cause your product to be unsafe. That way you make good to your customers and prevent your product launch to crush your business before it has a chance to grow.
When you start your own business, it’s probably because you have certain skills that make it a good career choice for you. You might be very good at what you do, but that doesn’t mean that you can’t make mistakes. With certain businesses, when you make that mistake it could lead to losses for your client. When that happens, they could bring legal action against you to recover those losses.
As an example, imagine a painter who is hired to paint a large ballroom. They are given a deadline because the ballroom will be hosting a very important event. However, as you are painting and almost finished, you realize that you used the wrong type of paint and you will have to do extra coats. Because of the extra time you will need, the ballroom will not be able to host the event, and will lose out on the revenue, plus have their reputation damaged. If you have professional liability insurance for self-employed painters, you will be protected from making good on their losses out of your pocket.
In this day and age, just about everything is stored in digital format. More purchases than ever are made online, and your startup will need to have a secure solution to keep your clients’ information safe, as well as your staff information. However, despite best efforts, hackers can be very determined, and they could still access your info for nefarious means.
If you have a data breach, your customers or your staff could bring legal action against you. It creates privacy and financial risk for them, and they could fall victim to identity theft and fraud. If you are sued for negligence, you will need protection. Cyber liability insurance will help cover your costs, including legal costs and damages. Depending on the provider, it may also offer compensation for alerting your clients of the breach, and spending to try to repair your damaged reputation. Cyber security risks are not going away, so you must have protection for it.
Commercial Property Insurance
Even if you are working from home, you may still need commercial property insurance. Your personal homeowners insurance may not cover certain things, such as inventory or equipment used for your business. Just because you store them in your home does not mean that they are protected. The last thing you want is to discover that you don’t have coverage when there’s been a disaster and you have to replace your inventory and equipment. Check with your insurance provider to make sure that you are properly covered.
Developing a startup can be incredibly exciting. It’s a chance to be your own boss and bring in your own money. However, it also carries with it unique risks that you need to consider. Even if you work from home all by yourself, you still might need insurance. It’s much better to be sure you are protected than to discover you aren’t when you need it.