Why small business insurance is critical for startups

Image by Markus Winkler from Pixabay

By Noah Rue

When you decide to jumpstart your first business, there are many considerations to make before you can hit the ground running. Whether or not you decide to first pursue an MBA before getting started, you’ll also have to focus on gathering investors, seeking out initial funding, working on a business plan. From there, the details get a little more specific — you’ll need to design the perfect product, develop your marketing plan, and of course, get insured.

Business insurance comes in many forms and having it is critical during the first stages of your company. There are myriad reasons why many small businesses fail in the first year, ranging from a natural disaster to an unpredictable lawsuit. To prevent any of these issues from sinking your business, you’ll want good coverage. Let’s look at different types of insurance so you can decide what is best for your growing organization.

Property insurance

As a small business, you must invest in property insurance. Many entrepreneurs who are just starting out have put all of the money they have into their business, and if a disaster were to occur and any of your equipment or property at your establishment was destroyed, you could likely be looking at an unexpected financial setback that you may not be able to recover from. Especially in cases of financial crises, you may be tempted to seek out immediate solutions such as payday loans, but those solutions may result in a negative impact on other aspects of your life. Because of this, it’s imperative that you invest in the right business insurance from the get-go. For example, with property insurance, your computers, furniture, inventory, tools, and more are covered so you can get back to work in record time.

When it comes to business essentials, your files and paperwork are just as important as the computers you use to create them. You never know when a flood or other natural disaster could wipe out your paperwork. So in addition to keeping physical files properly sealed in waterproof storage containers and having your plumbing inspected, insurance can help protect you in the case that this essential information is damaged.

A great perk that not many new business owners realize is that commercial property insurance is tax-deductible. This is a federal benefit that is provided because some form of business insurance is required by your state. Other products, including data breach and general liability insurance premiums, are also tax-deductible.

Worker’s compensation

If you have any employees working at your startup, then you need to also look into worker’s compensation insurance. This coverage is necessary because it pays a wage and medical benefits to any employee who is injured or becomes ill while on the job. This insurance also pays death benefits to families of employees who are killed while at work.

While having worker’s compensation insurance is important to show your staff that you care about their wellbeing, it is also required for businesses that have employees who are not owners. There are very few exceptions to this rule. When an employee is injured, they must immediately see a doctor to get medical documentation, and if their claim is approved, the benefits will then be paid out.

Even if it wasn’t required, it would still be a smart idea for a small business to have worker’s compensation benefits. The cost of an injury can be catastrophic and a single claim could put you under. Even more than that, if you wait too long to sign up for worker’s compensation, you could also face large penalties, and with your small budget, the cost may be too much to take.

Other insurance types for your unique needs

While some forms of insurance, like property coverage, are important for every organization, the supplemental insurance you choose may depend on your specific needs. For instance, if you as the owner are integral to the success of the organization, then you may want to invest in life insurance so your family and your employees can be assisted if something happens to you.

Companies that focus on physical goods would be smart to obtain liability insurance in the case that their product accidentally injuries a customer. This coverage can also be beneficial if a customer is injured when visiting your organization. The insurance will not only cover the medical bills of the injured party, but it can also pay for attorneys’ fees and defense expenses.

There are also more specialized forms of insurance that you may or may not need for your particular organization. Companies with a fleet of trucks should invest in business auto insurance which can cover those vehicles and any damage or third-party injuries caused by those autos. If you have a board of directors, look into directors and officers liability insurance, which will protect them if it is deemed that they violated the rights of others. The point is that you should do your research to ensure that you are covered for any unique scenarios you see regularly.

If you are in the process of launching your own business, take the time to look into the insurance that you need and get your organization started on the right foot.


Noah Rue is a journalist and content writer, fascinated with the intersection between global health, personal wellness, and modern technology. When he isn’t searching out his next great writing opportunity, Noah likes to shut off his devices and head to the mountains to disconnect.

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