Many new businesses starting out today are either creating cutting edge technology or are using technology to deliver a product or service in a more efficient and profitable manner. And with cloud-based systems, virtual accountants, and teleworking, the cost to start a new company is lower than ever. However, as a new business gets off the ground and begins acquiring customers, one step business owners definitely don’t want to skip is obtaining the proper commercial liability insurance. Below are the top 5 mistakes most technology startups make when purchasing their business insurance.
- Not purchasing hired and non-owned auto liability insurance.
This insurance policy usually attaches to the BOP (Business Owners Policy) and protects the company from the exposure created when employees, founders and contractors drive their personal vehicles for business. Even errands like driving to the bank to deposit a check or to Starbucks to pick up coffee for the office creates exposure. Auto liability claims are the second largest type of claim that technology companies experience.
- Thinking you don’t need technology errors and omissions insurance because your users are’t paying yet.
Users are great and paying users are even better. However, they can both bring equally severe lawsuits against your business. Just because you have “beta” customer who isn’t paying yet doesn’t mean that your technology service won’t fail and cause them financial harm.
- Failing to purchase workers compensation insurance.
The law in most states is that you must purchase workers compensation insurance when you have three or more employees. But having less than three employees doesn’t remove the requirement to pay for their medical bills in the event they are injured on the job. So the next time you ask an employee to run out and grab lunch for everyone, remember that the errand is a work sanctioned event and any harm that employee may incur while on that trip will be the responsibility of your company including paying for medical bills in the event of injury.
- Believing that as the company grows it can “round out” its insurance policies with more robust coverage.
News flash; you don’t have to be a big company to be sued like one. More importantly, you want to buy insurance “today” for how big you expect to be “tomorrow”. That is why you want to make sure you assess your insurance each year, at a minimum, and purchase based on the growth you expect or are aiming to achieve.
- Believing that you have to work with an insurance agent to purchase your company insurance.
There can certainly be some benefits from working with a commercial insurance agent, but many technology company executives are already handling other business services online so why not manage your business insurance online as well? Using a cloud-based platform like Layr gives you the same or better insurance coverage, at a same or lower price and in just 30 minutes while also offering the flexibility of monthly credit card payments.
Sorry for that last one, but we had to give ourselves a little plug. As you consider insurance for the first time or consider how you will adjust your current coverage at renewal, make sure you avoid these pitfalls so that your company can continue moving forward without any costly setbacks.