Among the many challenges startups face, running out of money at a critical time is probably the one that has caused so many of them to fail, especially during the first year. If you are starting a new business, you can expect to have a lot of expenses, many of which are unavoidable if you want your business to survive and grow.
One of the expenses startups face is insurance. Insurance is an issue every new business owner must consider. However, although insurance is vital, you should not starve your business for cash by paying insurance premiums to cover against losses that will probably never happen. As such, you need to be careful when deciding which type of insurance you should get first.
If your startup owns a workspace or leases the property, you must get property insurance. Property insurance covers your startup’s physical assets, including the building, equipment, and inventory. A wide range of events can be covered by property insurance, such as theft, fire, wind and hail storms. If your insurance policy does not cover mass destruction events such as earthquakes and flooding and your area is at risk of such types of events, you may want to ask your insurance provider about how your business can be covered.
Workers’ compensation insurance
As soon as you hire your first employee, you will need to get workers’ compensation insurance to protect your business and your employees in the event that something happens. Cerity.com advises that this is a legal requirement in many states, despite some variations in the law. While you may follow safety guidelines carefully, accidents can happen, and they can result in injuries for your employees or worse. Workers’ compensation insurance provides coverage for medical treatments, disability or death benefits if an employee has an accident while working for your business.
Product liability insurance
If you plan to manufacture any products to sell to the general public, product liability insurance is essential for your new business. Even after taking the necessary precautions to ensure that your products are user-friendly and safe, you might still find yourself facing a lawsuit as a result of damages caused by your products. Product liability insurance covers the compensation claims as well as legal fees arising from such a lawsuit.
No matter the type of business you are starting, insurance is a necessary evil in the modern global economy. By buying the right insurance policies, your business can avoid potential financial losses and improve its chances of surviving and growing into a big business.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.