Business insurance might not be your favorite subject, but it is extremely important to know the basics as an entrepreneur, and especially when you are building a startup from scratch. From choosing the right kind of insurance to renewing the policy accurately, you need to be keenly involved. After all, your business can be at risk without the right kind and precise level of insurance.
This article will particularly discuss the business insurance renewal for startups because it is a little different from regular businesses; especially the venture-backed startups which undergo a significant change/growth within a year. This fast-paced growth actually affects your insurance coverage and so you need to update yourself on how to be properly protected.
Here are step by step points to consider before you actually renew your business insurance:
1- Know your business worth; it is very obvious that you should know what your business is worth so you can accurately project how much insurance to cover. Get the real market value of your business determined right before planning the insurance renewal.
2- Outline your liabilities & do proper risk analysis; with the accurate valuation of your business, you can find your exact liability coverage needs. With a good liability insurance, you basically protect your business if and when it is sued. A proper risk analysis is required based on liabilities and it should ideally be done by a finance person. If your startup is currently not having a proper finance department, you may outsource this task.
3-Explore and evaluate multiple quotes: Since there are a lot of insurance companies that cover startups, it’s totally fair and fine to check with some of them to know what they have for you. Read the fine prints that come with all the quotes, i.e. know the terms and limitations etc.
4- Understand the effect on premium; if you see premiums increasing in your case, don’t worry. It happens to startups that are growing big at a faster pace, i.e. it’s generating more revenues, hiring aggressively, raising capital, etc. Yes, all these are good things, but at the same time, your risk profile is increasing too!
5- Know the external factors affecting the insurance policies; as a fact of the matter, market factors play a vital role in insurance pricing, i.e. insurance is a financial product and happenings like economic ups and down in the country, market demand, overall losses sustained by insurers, etc. have direct impact on the business insurance policies.
6- Consider your data protection; you must be aware of the fact that the information security breaches are becoming more common in the business world, especially in the financial, healthcare, and retail sectors, or any business that is involved in electronic transactions. Make sure that the insurance policy that you choose includes electronic data protection coverage.
7- Just in case if you are thinking “non-renewing; that’s certainly not a good move. If you are thinking not to renew the insurance for some time even, it’s not a good idea because an apparent risk exposure apart, it can make it tougher and more expensive to purchase new insurance later.
The Bottom Line:
For a startup business, it is important to provide their insurance broker with a full update about the business’s financial health, so they can offer you the best solution. Moreover, a due diligence is the key to cost-effective business insurance renewal. So, update your business’s financials, update your insurance broker and also search for better options every time you need business insurance renewal.