More than three million people were injured on the job last year, according to the U.S. Bureau of Labor Statistics. While workers compensation insurance covers medical expenses and lost wages, your startup also needs liability insurance in the event of a lawsuit. Liability insurance protects you against claims made for bodily injury or property damage.
A lack of adequate insurance could leave your startup vulnerable to a host of legal and financial woes. While some business structures (such as an LLC) protect the personal assets of the owner, this protection is not a substitute for liability insurance or workers compensation insurance. Here are four types of business insurance that every startup owner needs:
General Liability Insurance
This type of insurance protects your startup from lawsuits over everything from faulty products and services to inept employees and scorching-hot coffee spills. Liability insurance pays the cost of damages as well as attorney fees. If you manufacture, distribute or sell a product (wholesale or retail), product liability insurance will protect your business should a product defect cause injury. And while general liability insurance is a must, the type of liability insurance that your startup needs may vary. Check with the requirements mandated by your state.
Workers Compensation Insurance
If your business hires a W2 employee, state law requires you carry workers compensation insurance. You may carry workers compensation insurance through a commercial carrier, on a self-insured basis or through a state workers compensation insurance system. Stiff penalties apply for noncompliance. Since insurance requirements may vary from state to state, talk to a business insurance specialist to learn more about this type of insurance and the policies and riders available in your state.
Commercial Property Insurance
Commercial property insurance will reimburse your company for loss and damage from a fire, smoke, severe weather, vandalism and other catastrophic events. Home insurance policies generally do not provide insurance coverage for home-based businesses. While you may be able to add a rider to your policy, the Small Business Administration recommends purchasing a separate commercial property insurance policy. The definition of property under these policies is fairly broad and includes computers, company papers, money, building, business interruptions and lost income. Talk to an insurance provider to find out which policy options are best for your startup’s needs.
Unemployment Tax Insurance
If you have W2 employees, you are legally required to pay unemployment tax insurance to your state. You will first need to register your business with your state’s workforce task agency. If your business is located in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island, you are legally required to purchase employee disability insurance. If your startup is based in another state, you may opt to provide this insurance through an employee benefit scheme, although you are not legally required to do so.
Karen Sanchez runs the HR department for a 103-person manufacturing business.