5 Essential Types of Start-up Business Insurance for your New Business

Startups have a bad reputation for failing prematurely. According to studies, at least 36% of small firms face legal action every year, and 56% of businesses collapse within the first four years due to a lack of proper insurance coverage. The cost of not having insurance is much higher than the expense of obtaining coverage because most small business owners lack the financial resources to cope with lawsuits. 

A startup company needs a commercial insurance provider that is easy to comprehend and purchase. New business owners may be unfamiliar with the various policies and how each protects their assets financially. It can be extremely beneficial to have a carrier supplying this information to a startup. 

There are many different types of business insurance, and the types you need will vary depending on your business. 

The types of insurance  

There are several aspects to focus on when planning corporate insurance for your business. A startup usually needs workers’ compensation for the employees, directors liability insurance, professional indemnity, business interruption insurance, and cyber risks for unforeseen circumstances at a minimum.

Work Injury Compensation Insurance

The liability to compensate their employees suffering from work-related injuries while on the job is covered by this insurance, in accordance with the Work Injury Compensation Act (WICA). Monetary security is provided to your employees by paying medical leave earnings. It also safeguards from legal entanglements. Even if you are running a small business, it is mandatory by the Ministry of Manpower (MOM) to have WICA in Singapore. 

To make sure you’re fully compliant with the Work Injury Compensation Act, WICA insurance would be needed if you have employees who are:
 

1	Doing non-manual work and earning below $2,600/month
2	Performing manual labour, regardless of salary
3	Hired under the SG United training programme

Both local and foreign employees must be covered by insurance. You can be jailed for up to 12 months, and/or fined up to $10,000 when you fail to provide WICA insurance for your employees if they fit in any of the categories above. You are free to purchase insurance for other employees if you deem it necessary. However, if they file a valid claim, you must indemnify them regardless of whether they are insured.

The following can be claimed under WICA Insurance:
 

1	Medical expenses
2	Medical leave wages
3	Lump-sum compensation for the death or total/permanent disablement

Office Protection

Office Protection is a multi-line insurance solution customised to your company’s needs. It is more cost-effective and is an essential defence against forces that disrupt your business. For instance, Business interruption offsets ongoing expenditures, covers lost revenue and wages if your business is suspended due to fire or flood damage. The following are examples of common coverage included:
 

Covers	Examples
All Risk Protection	Fire, Explosions, Theft and other perils
Public Liability	Covers legal costs & compensation property damage 3rd party
Business Interruption	Cover loss of income

Professional Indemnity Insurance

Professional Indemnity Insurance protects your company and yourself from any legal liabilities arising from acts of negligence when you provide professional advice and services. This insurance is a defense for improper professional services.  It is different from Business Insurance and Business Insurance does not cover this protection. It is specific to professions like auditors, lawyers, accountants.

Directors & Officers

Directors and Officers Insurance (D&O) protect all corporate directors, officers, and anyone with managerial roles. It covers actual or alleged breach of duty, failure to comply with workplace regulations, misrepresentation of corporate assets, and negligence. It offers financial support for a standard indemnification clause, which protects them from lawsuit losses. Additionally, having D&O Insurance raises risk awareness, allowing people to be more conscious of the stakes of every decision.
 

1	All corporate directors, former directors, and managers
2	Civil fines and penalties
3	Legal Defense cost and damages for insured
4	Indemnifies insured person
5	Automatic coverage for new subsidies

Cyber Risks

In the increasingly digital world, it is becoming common for small and medium businesses to face greater risks of cyberattacks than big corporations as the former lacks the security infrastructure, thereby making it easier for hackers to steal confidential data and disrupt business operations. 60% of small businesses would collapse within six months from cyber-attacks. According to another research, 73% of the clients would hesitate to do business with a company if their data is not safe, and 30% stated they would cease dealing with the company entirely if their data was breached. Even if you are a small corporation, it is essential to have startup insurance. You can never be too safe when guarding your corporation against cyber risks.    

Which to choose?

Despite the numerous solutions available for businesses, they are classified under three major categories: Office, Employees, and Legal Liability. 

To effectively identify the scope of your liabilities in the event of any bad occurrences, it is necessary to first understand the nature of your organization and conduct a threat assessment. The corporate insurance companies in Singapore are qualified to provide professional advice and find the right insurance for your company.