Insurance Needs for Start-ups and Non-profits

Insurance Needs for Start-ups and Non-profits

Insurance protects against financial loss that can devastate start-ups (particularly bootstrapped ventures) and donor-driven non-profit organizations. As a start-up or non-profit business owner, you need to secure your company, employees and growth against with the right insurance products. We’re not going to sell you products in this post, rather, share knowledge about insurance requirements that can help you manage risk and enjoy peace of mind.

Three basic categories of insurance:

1. Statutory insurance is required by law, and mostly cover employee benefits. All-volunteer non-profits or non-profits with no employees or vehicles may not require statutory insurance.
2. Contractual insurance is not mandated by law but may be required to meet contractual obligations to which your company is bound. Examples include proof of liability insurance that office facilities may need before allowing you to hold meetings or conferences and lease insurance at the time of renting office space.
3. Optional insurance, as the name implies, may or may not be necessary – a decision that you need to make after considering risks in different areas. Seek out advice from a business owner in your industry or an insurance professional to determine the kind of coverage you need and associated costs.

With this basic idea, let’s look at the common insurance coverage that start-ups and non-profits purchase.

General liability insurance

It has been three months since you opened your smartphone retail outlet. Locals have started dropping in to see if you’re offering discounts or loyalty cards. One evening, the traffic in your shop is unusually high and a customer loses his footing on the floor, falls and suffers bodily harm. Was there a problem in your shop’s flooring that resulted in the fall or was the customer accidentally pushed in the crowd? In the former case, the customer can sue you.

General liability insurance offers protection against losses arising from bodily injury or property damage and should be essential to any company’s risk management program.

Professional liability insurance

Also known as ‘errors and omissions’ or ‘malpractice’ insurance, this policy safeguards against liabilities occurring from acts, errors or omissions by directors, managers, staff, volunteers and your non-profit organization/start-up company.

Errors and omissions come in many flavors! They can be simple (your hair salon used strong bleaching chemical’s on plaintiff’s hair, causing her scalp to burn) or complex (a technological error in the provision of services by your company). Regardless, professional liability insurance can help you avoid the cash bleed from expensive lawsuits, settlements or judgments.