You’ve successfully launched your new business. You have your first "big” client and you’re all ready to start working with them when you get the call. "Please fax over a copy of your insurance certificate, we need that before you can come onto our premises.”
What does insurance have to do with what I’m doing for my new client? How do I get it in place fast so I can do the job? This is a familiar scenario that I see everyday with startup companies. They will have a great business concept and their operations are going forward; however, they have forgotten to get the necessary insurance and now it’s panic time.
General Liability is the most common insurance that a new business is required to obtain. It protects your client if, by coming onto your premises, an individual suffers bodily injury or property damage. The ability to obtain insurance quickly depends entirely on what your business is. If you’re a consultant, you can obtain the necessary policy quickly and inexpensively. If you’re a contractor, it can be more complex and more expensive.
When purchasing insurance, you need to determine what your exposure is to make sure you spend your insurance dollars in the best way. While General Liability may be what your client is requiring, it may not be what you need to protect your business. If the service you’re providing is advice that can result in causing a monetary loss for your client, you need Errors and Omissions (this is also referred to as Professional Insurance).
If you are renting space or you own a building you will need to consider property insurance. If your business is dependent on the space you occupy and would cause you a monetary loss if you couldn’t operate at the property, you need to consider Business Interruption which covers your loss of profits and extra expense incurred to get your business back up and running.
What about your auto exposure? Even if you don’t have any autos that are used in your business you still have a substantial auto exposure. If you are using your own vehicle to run to the bank or visit a client and cause an accident, not only will the person you hit file a claim against you personally, but he will also file a claim against your company, since you were on company business. The coverage that protects you for this is Non-Owned Auto Liability Insurance.
There are other exposures that can cause risk to your business. In many cases there are insurance policies to which you can transfer that risk. Finding a insurance professional to advise you is essential. Your insurance broker should be selected with the same consideration you use in choosing your attorney or CPA. As part of developing your new business plan, you should take the time to write up your potential exposures and then discuss them with your agent.
The key is to understand what your exposures are and make the decision to either accept the exposure as a risk of doing business or transfer the exposure to an insurance company. Understanding the exposures you are taking on in your new business can be the difference between success and failure.
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