Author: Naval Goel, Founder of PolicyX.com
Being an entrepreneur does sound exciting but his life is not that easy as it seems. The day he begins to carve the business plan, he knows he will have to go through many hardships. Most of the startups are delayed just because it is a well known fact that there is no guarantee of making profits or earning something to even cover up the expenses. That is the most-known risk when it comes to entrepreneurship.
Well, it really takes strong heart to become an entrepreneur and soar high in the mid of daunting ups and down and unending risks but it is not an impossible thing to achieve. All you need is the ability to foresee the risks and planning and resources to manage those possible risks. And the ultimate resource to mitigate risks related to businesses since ages is insurance.
One type of insurance cannot suit every type of enterprise. Neither one kind of insurance can help at every phase of the business. Therefore, it is imperative to understand the needs as well as the stage of your venture and buy the coverage.
Let’s take a look at risks an entrepreneur has to possibly face and the ways he can deal with them.
An entrepreneur has to gauge possibilities of liabilities and their extent even before he starts earning any income from his startup. An entrepreneur can become liable to external parties for various reasons. To safeguard him from a range of risks that can tarnish the image of his enterprise or cause him to pay hefty compensations insurance companies offer insurance coverage for credit liability, environment liability, product liability, commercial general liability, director’s officers liability (D&O) and a few more.
Kinds of liability insurance:
Commercial general liability insurance: It takes care of the liability imposed upon you or your staff due to negligence. Liability insurance provides you support in form of defense in case of lawsuit and protection against damages caused to the third party.
Product liability insurance: When you are a manufacturer, your products are used by people. You do not want to do it purposefully but your product can harm them while they use it. This can render you liable towards them. Product liability insurance can be taken separately and tailored as per the product manufactured.
Credit insurance: Risk while you operate business do not limit to just property and liability, you can accrue losses if any debtor defaults to pay you the dues. Credit insurance policy covers the loss due to non-payment or insolvency of debtors.
Directors and Officers liability insurance: This kind of insurance is coverage against the wrongful act of enterprise’s directors or officers while they are obligated to perform their duties. Wrongful act may include omissions, misstatements or breach of regulations.
Besides external parties, the entrepreneur has to fulfill certain obligations and responsibilities towards its workers and employee as well. Any SME employs not less than 200 people. Employees or the working force is the most important asset an enterprise owner can possess. People who work for you are putting efforts to turn your thoughts into reality, which makes you equally responsible towards them and their needs. If they happen to suffer injury resulting in disability or death, you as the owner should be armed with workers’ compensation insurance.
Workers’ compensation insurance: Well, some people deny this and do not give any importance to workers’ compensation insurance. This leads them to pay big bucks when their employee or worker suffers due to an accident while at job. Coverage you get through workers’ compensation insurance not just protects your employees but also you as an entrepreneur from possibilities of making hefty compensations.
To start a business, an entrepreneur needs either physical set up like office premises, warehouses etc or some kind of assets. if not this, some startups have owner’s home as their base. Events like burglary, theft, fire, earthquake, storm or flood cannot just arrest the growth of the business but can also make you lose your assets along with bringing your business to halt. To get coverage against these kinds of eventualities, the entrepreneur can procure asset insurance:
Kinds of asset insurance:
Property insurance: Whether it is your property or rented one, you should have property insurance. Except a few, insurers can save you from all possible events that make you vulnerable to lose your property. Please note that property insurance does not just protect the structure of your building but also your belongings. You can either procure insurance for the structure or belongings or both. When you insure your belongings, it also includes third-party objects used by you or your business.
Home insurance: If you are work-from-home entrepreneur, you should have appropriate home insurance. Though home insurance may not cover your home against possible eventualities the way an office building is covered, but additional coverage that is customized as per your needs, can protect the assets you require to run your home-based startup.
Specific asset insurance: Certain businesses rely solely on certain assets to earn income. For instance machinery for printing. Any kind of damage to the printing machine can disrupt the flow of income. Asset insurance provides coverage against any kind of loss or damage to the insured asset.
Auto insurance: Vans and trucks are the most common vehicles used in businesses to transport goods from one place to another. Along with this, many other vehicles are employed to execute business operations. However, it has been noticed that majority of them are not insured. This can cause the owner of the business to pay for the losses in case of any accident. If not a comprehensive coverage, it is crucial to have at least third-party auto insurance.
Insurance of goods in transit: An auto insurance policy generally covers the passengers and driver along with the vehicle as well as the damage to the third party but it may or may not cover the goods that are being transported. Since the quantity and the kind of goods or raw material can keep changing, it is recommended to insure them while they are in transit.
The way any unfortunate event can make you lose your property, it can also make you lose your business. Any mis-happening like lawsuit will render the staff unable to work in the office. If continued, this can bring the venture to halt. To protect you from this kind of situation, insurance companies offer business interruption insurance
Business interruption insurance or loss of earning insurance: This kind of insurance compensates the entrepreneur for the lost income. The entrepreneur has to determine the length of time he wishes to acquire the coverage. Premium amount would be calculated accordingly.
There are certain other kinds of insurance an entrepreneur may need depending upon the needs of his business. These can be:
Travel insurance: If you and your employees need to travel to fulfill entrepreneurial obligations, travel insurance is a must. Just like workmen’s compensation insurance, travel policy takes care of your employees and their needs while they are at job as well as when they need any kind of support while on journey.
Accidental insurance: Provides financial protection in case the employee suffers injury or disability due to an accident.
Group health insurance: It can cover the employee as a part of the group as well as provide extended coverage to his family members.
Any venture or an entrepreneur needs not one kind of insurance but of various types to ensure that every possibility of risk is addressed and taken care of before it actually takes place. Therefore, it is lucrative for him to club various kinds of insurance for his business and pay for the umbrella policy. This not just helps him to save on the premium but he is also able to manage all of them single handedly.
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