Insuring your startup shouldn’t be difficult. Taking the leap and starting your own company is an exciting time, you’ve got an amazing idea, product or service and all you want to do is get out there and tell the world about it.
It can also be a daunting experience, you’ll be thrown into the deep end and completely out of your comfort zone, you’ll have to do and deal with things that you might never have encountered before. Which is why having the right team around you at this time is essential to starting your business off on the right foot – especially when looking to purchase insurance.
Insurance is always one of the last things on the business plan that anyone tackles and in some cases, is often a forgotten and unexpected expense. In reality, insuring a company for the first time is a bit of a minefield and very easy to get wrong, which is why it’s important to seek advice.
Usually the first thing I hear when talking to a start up is: “I’ve got no idea what I need” which is often followed by a couple of sobs and whispers of “h…hh…help me… please…” So, what do you need I hear you ask? I’ve broken it down into 3 sections which I’ll explain below.
- The Legal – Believe it or not, certain forms of insurance are actually a legal requirement for limited companies, for example – if you have employees, if you hire part time labour and even if you bring in an apprentice – you need Employers Liability insurance whether you like it or not. The HMRC can fine a company up to £2,500 for every day you do not have the appropriate cover in place for your employees. Some sectors and trade associations also require you to have professional indemnity to trade and/or register.
- The Contractual – (I’ve seen this more times that I can count!) Picture this; you’ve just signed your first big deal, you get the draft contract through and have to meet all sorts of requirements and service level agreements. Somewhere in the middle, the customer starts asking you for insurances you’ve never heard of before or at much higher limits than you are used to. If you are set to offer the customer a professional service, professional indemnity insurance is usually required to protect against your errors, omissions, breach of intellectual property, contractual disputes etc. If you have just landed the dream investment you have been hammering the funding avenues for, don’t be surprised if you are requested to purchase directors & officers insurance, to protect the individual decisions made by the directors that may affect the overall shares of the company. In contract you could be requested to have a number of different insurance policies, don’t be afraid to send it to your insurance adviser for a review – make them earn their coin.
- The sensible – So we’ve had the legal and the contractual, now comes the sensible. “What’s sensible to insure against?” is often a question most company owners wait for someone else to ask them. For example, 57% of businesses have no form of cover to protect themselves or their key individuals against critical illness and death, despite over 90% of business owners agreeing that the loss of a key person would impact sales and income significantly. A business can also buy insurance to protect against unpaid invoices from clients big and small, which can set a company back significantly.
An open and frank conversation about your business and plans can cover all of the above, and a consultation with a professional broker is completely free of charge.
There is a misconception that “using a broker is expensive” but I can assure you, that trying to do it yourself and failing will cost you more money in the long run.
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