Archive › April, 2013

A Tech Startup’s Guide to Navigating Insurance

Blog post written by Matt Carlson, CIC, Vice President, Risk Strategies Company

There are a lot of moving parts to a startup business. While all businesses need some amount of insurance protection, technology companies do have some special needs. The following is a checklist of insurance coverages that businesses can use to make sure they minimize their risk and liability.

Errors & Omissions Liability (E & O) + Cyber/Network Liability

Why You Need It – Form of liability insurance that helps protect professional advice- and service- providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and certain damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, an error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a General Liability Insurance Policy which addresses more direct forms of harm. Cyber/Network Liability can usually be added to an E&O Policy to protect your exposure of a network going down or private information leaking and causing financial damage

When You Need It – Once company goes beta/live, releases software or a client contract requires the coverage.

Approximate Cost –  $2,000-$5,000+;  Premiums  are  based  on  various  factors  including  gross revenue, founder resumes and financials.

Time It Takes to Get it In Place – 2-3 weeks. Need an application, resumes and financials.

Workers’ Compensation

Why You Need It – Protects you the employer for bodily injury to employees if they get hurt on the job. The injury must happen in the course of or arising out of employment to be considered a Workers’ Compensation claim.

When You Need It – Once the first employee is hired whether full time or part time. Founders/owners have the option of not purchasing Workers Compensation insurance for themselves.

Approximate Cost – Premium  is  based  on  payroll,  probably  $1,000-$2,000  for  a  few  office employees; Rate is established at beginning of policy and an audit is performed at end of the term.

Time It Takes to Get it In Place – 2-3 weeks. Need estimated annual payroll separated by the class code and state employed.

Commercial General Liability Insurance Policy and a Commercial Property Policy

Why You Need It – Commercial General Liability covers bodily injury or property damage cause to a 3rd party. Commercial Property coverage protects a business’s own business property within the office.  This policy can also cover the loss of use of the premises in the event of a covered loss such as a fire.

When You Need It – When you start a business but at minimum when office space is leased or when this insurance is required by contract.

Approximate Cost – $500-$2,500+

Time It Takes to Get it In Place – 1-2 weeks. Premium based on sales, square feet of the office and property limits.

Directors & Officers Liability Insurance

Why You Need It – Provides coverage for a loss as a result of a legal action (whether criminal, civil, or administrative) brought for alleged wrongful acts in their capacity as directors and officers of the company

When You Need It – When you start a company but at minimum once you have investors or are required by contract.

Approximate Cost – $1,000-$3,000+

Time It Takes to Get it In Place – 1-2 weeks. Need to fill out application and provide financials.

Employment Practices Liability

Why You Need It – Protect your organizations against employee suits for discrimination, wrongful termination, sexual harassment, failure to hire, etc.

When You Need It – Once you have a handful of employees.

Approximate Cost – $1,500-$3,000+

Time It Takes to Get it In Place – 1-2  weeks.  Premium based on number employees.  Need application and employee handbook (if any).

Key Person Insurance

Why You Need It – Helps with cost to replace expertise after an essential founder’s death.

When You Need It – Once you start making profit, have investors or want to sustain continuation of the company in case of a founders death. Can be required by investors.

Approximate Cost – $250+ per year

Time It Takes to Get it In Place – 2-4 weeks. Need an application and a medical physical.

Risk Strategies is dedicated to helping technology companies secure comprehensive and cost-effective insurance solutions. Risk Strategies is backed by unrivaled service, support and resources, and our national footprint and premium volume assures that our clients will have numerous solutions and carrier options. Please note that this blog post provides insurance information that is brief, general, simple and subject to specific policy provisions and individual circumstances.

For more information, contact Matthew D. Carlson, CIC, Vice President, Risk Strategies Company.

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