5 types of commercial insurance policies every tech startup needs
5 business insurance policies:
- General liability insurance
- Professional liability insurance
- Cyber liability insurance
- Commercial property insurance
- Worker’s compensation insurance
Becoming an entrepreneur is a bold move that comes with great personal and financial risk. Starting a tech business has its own set of challenges. While technology is in high demand, every company that touches the digital space faces risks related to cybercrime, as well as traditional risks, such as property damage, employee injuries, product liability, and reputation-damaging mistakes.
Part of your business plan should include insuring your investment and your reputation. What types of commercial insurance do tech startups require? Here is a list of strong suggestions.
1. General liability insurance
Nearly every business should have general liability insurance, no matter the industry. It is meant to cover your legal expenses, fees, and any possible settlements if you ever face a lawsuit.
What it covers:
- Client injuries (such as slip and falls)
- Damage to client’s property
- Advertising injuries, including copyright infringement, libel, and slander
Injuries and damage to property are fairly easy to understand, but what about the last bullet point? How does general liability insurance cover these risks?
Slander or libel – If you or an employee slanders someone or if you make false statements – either in writing or picture – you can be sued for defamation. This is a unique kind of exposure that is highly recommended for certain industries, including legal, media, advertising/marketing/PR firms, and publishers.
Violating privacy rights – If you make oral or written statements that misuse or misappropriate someone’s name or likeness, this could constitute a violation of privacy rights. Disclosing private facts or information is also covered.
Copyright infringement – Using another company’s advertising/branding themes, concepts, logos, images, words, or music without permission can constitute copyright infringement. This includes traditional media (print ads, radio, TV, brochures, billboards) and digital media, such as social media posts. For instance, you can’t use the Nike logo in your Facebook post unless you have permission. Your YouTube video can’t include copyrighted music or images unless you receive permission and most likely pay a fee.
2. Professional liability insurance
Also known as Errors and Omissions Insurance (E&O), this type of policy is designed to cover legal expenses from a lawsuit involving work performance. If you’re starting an IT business, you will most likely need tech E&O, which bundles E&O and professional liability together in one policy.
Tech E&O covers:
- Professional oversight and mistakes
- Missed deadlines or failure to deliver work/services
- Accusations of negligence
- Third-party cyber liability (data breach, loss of data, ransomware, cyber fraud)
Third-party cyber liability offers financial protection if a client sues you after a cyber event. For example, a software program or update you recommended causes a client to experience a cyberattack. Another instance would be if an attack stems from a third-party vendor’s system, such as a cloud storage company, computer hardware supplier, freelancer, consultant, or even a cleaning service.
3. Cyber liability insurance
As a tech company, you will be handling the private data and information of your clients and customers. Cyber liability insurance covers expenses related to a cyber event, such as a data breach.
There are two types of coverage: first-party and third-party.
First-party – This helps your business recover after a data breach. It covers expenses related to the event, such as customer/client communications, credit monitoring services, public relations/reputation management, and any actions taken to recover or replace lost data.
Third-party – This type of insurance pays your expenses if a client suffers a cybersecurity breach via your company or a product you manufactured, sold, or recommended. IT firms that install hardware/software or service computer networks are good examples of companies that might need third-party coverage.
- IT consultants
- Software developers
- App developers
- Network/security consultants
- Website designers
- Web-hosting businesses
As we mentioned, third-party liability can be bundled with general E&O or it can be bought separately.
4. Commercial property insurance
If you own or rent a physical space for your business, you will need commercial property insurance. This will help repair or replace the physical building, as well as property inside the building if either is lost, stolen, or damaged. The damage could be from a storm, fire, water (leaking pipes), or vandalism.
Covered property includes:
- Inventory & products
- Furniture, desks, and chairs
- Tools, electronics, and equipment
Like a homeowner’s policy, commercial property insurance may not cover floods related to tropical storms/hurricanes or earthquake damage. You may need to buy a separate policy for these events, especially if you live in an area that is prone to hurricanes, earthquakes, or floods.
5. Workers’ compensation insurance
Most states require you to carry workers’ comp insurance if you have one or more employees. This covers injuries or illnesses that occur on your property or in the course of doing business. Workers’ comp covers the medical expenses and lost wages of injured employees.
Examples of workplace injuries:
- Slip and fall
- Fall from height (ladder, stairs, raised platform, roof)
- Struck by or against another object
- Repetitive motion injuries (carpal tunnel syndrome, ergonomic injuries, lower back problems)
- Motor vehicle accidents
- Entangled in machinery or equipment
Other types of commercial insurance you may need:
- Commercial Auto Insurance
- Employment Practices Liability Insurance (EPLI)
- Management Liability Insurance (D&O)
- Umbrella Insurance Policy
- Business Interruption Insurance
Protect your IT startup with the right commercial insurance
Every IT startup needs a variety of commercial insurance policies. They are designed to protect your assets, property, and reputation. You can speak to one of our insurance professionals to determine which policies you need to protect all of your hard work.
Avante Insurance can help you secure the right commercial insurance to protect your life’s work. Contact us to talk about your business needs and request a quote. We will ensure you have the right coverage to protect the enterprise you’ve worked so hard to grow.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.