To move away from under the wings of an employer and starting your own business is a dream for many. We have heard the success stories of many startups that started small and made it big, like Uber, Airbnb, etc. However, on the other side, there are also many startups that tanked.
Preparing for such worst-case scenarios and unforeseen circumstances will equip you to better deal with failure.
Here are 10 critical policies a start-up owner can opt for to minimise the financial losses and legal liabilities that could befall upon your startup.
- General liability insurance - General liability insurance will cover for claims arising out of bodily or other physical injuries against your business. If your product, service or operations causes property damage or injury, then this policy will ensure that your business continues to operate smoothly and will not get stagnated in the event of such claims.
- Corporate health insurance for employees- A corporate health insurance policy is a group policy that you can opt for your employees. With this policy, your employees will be covered for accidental and illness hospitalisation. Most policies also include critical illness and maternity cover. A health insurance provides a great window of opportunity to gel with your employees and provide a sense of security among them. It could also help in retaining the right talent in your company.
- Intellectual property rights policy- If your business has codes, algorithms, researches and finding that puts you one step above others, then losing them could lead you to lose out on the competition. You can protect these using the Scheme for Startups Intellectual Property Protection(SIPP) under the Startup Initiative in India. You can protect your trademarks.
- Cybersecurity insurance policy- Day to day working of many startups would be in the digital platform with little to no physical copies. With the ransomware attack of 2017 just a prelude to what could happen in the future, it is impertinent that we take care of our resources. A cybersecurity insurance policy can help cover for the losses due to a cybersecurity attack. This policy would be especially useful for startups heavily leaning on the digital platform.
- Proper Contract policy in place - Employee contracts are one of the foremost things that many startup owners tend to overlook. Even if you are working with some of the most trusted people in your circle, it is recommended to have a well-drawn contract detailing the salary, scope of work and stock options. It goes without saying that contract staff and vendors should be employed only under an effective contract system. This would ensure the work is completed on time and you can hold them responsible if it doesn’t.
- Property insurance for office- Property insurance protects the building and the contents inside it from fire, burglaries, and natural disasters. If you have bought your own office for your startup, it is best to protect that office with property insurance. If any mishaps as mentioned above, occur, it can throw a rift into your financial planning. It is better to invest a small amount in protecting your property rather than face the loss of millions in the event of any disaster.
- Workers compensation insurance policy - While a general liability insurance will protect your company from a third party's claims, a worker’s compensation insurance policy will protect you from your own employees’ claims. If your employee sues you for any bodily injury caused to them while being employed at your premise, a worker’s compensation insurance policy will compensate them for their loss in return for not filing a case. If your line of work is in hazard jobs such as manufacturing, then it is recommended to get this policy.
- Professional Liability or Errors & Omissions insurance- If any financial losses happen to a third-party from an act, error, or omission by your company or the service provided by your company, then the third-party can sue you for this negligence. You can protect against this with a Professional Liability or Errors & Omissions insurance. This policy will come in handy if you have to work with contract workers.
- Employment Practices Liability insurance- If your employees became dissatisfied with their tenure in your company, or if you face severe allegations like sexual harassment, discrimination, defamation and termination under wrongful grouds, then they can sue you. This policy will protect you against such claims. As your team grows from more than a handful people, it is better to get this policy under your wing to prevent substantial financial losses.
Commercial crime insurance - If your company runs into any criminal activities unknowingly,