Insurance for startup businesses
Small businesses are significant contributors to the Canadian economy. For context, nearly 99% of companies in Canada are considered small- or medium-sized businesses.
However, all small businesses began as startups. Throughout the lifecycle and growth trajectory of any startup company, a tailored insurance policy that’s designed exclusively for new and developing businesses is a must-have to ensure your survival and growth.
Depending on the industry, your startup business may be legally required to carry a certain type or amount of insurance. Or your business partners and investors may require you to have a policy.
What is startup insurance?
Startup insurance protects business owners from expensive claims such as third-party bodily injury and property damage, errors and omissions, and provides financial support if your commercial property and business contents are damaged, destroyed, or stolen.
What does it cover?
A startup insurance policy features different types of coverages that provide comprehensive protection. Most startup insurance policies include the following coverages:
- Commercial General Liability (CGL) Insurance: CGL provides financial support for your startup if you are subjected to a third-party bodily injury or property damage claim or lawsuit resulting from your daily operations. CGL also typically includes product liability insurance to cover you for any injuries or damages that are caused by a product you sell, distribute, or manufacture. It’s designed to provide you with funds to pay for your legal defence expenses and any compensatory awards ordered by a court.
- Cyber Liability Insurance: Any startup that has a website, e-commerce store, a point-of-sale system, or that collects and stores its customers’ confidential and financial information needs cyber protection coverage. Designed to provide you with financial support if you are a victim of a cyber-attack, ransomware, a phishing attack, or data breach, cyber liability insurance may pay your computing system damage and restoration costs, legal and credit monitoring fees, losses sustained due to a system outage and other recovery costs.
- Professional Liability Insurance: Commonly referred to as errors and omissions (E&O) insurance, professional liability insurance is necessary for any startup that provides professional or consulting services to its clients. It protects you from allegations of negligence, product failure, failing to deliver a service, or damage or loss to a client resulting from your services.
- Commercial Property Insurance: Also called business contents insurance, commercial property insurance provides your startup with financial coverage for its business property, contents, electronics, and inventory if damaged or destroyed by a natural disaster or extreme weather, or by unexpected incidents like fire, flood, theft, and vandalism.
- Directors and Officers (D&O) Insurance: If you’re aiming to court investors and raise money through venture capitalists to support and grow your startup, it’s likely you’ll be required to have D&O coverage. This type of insurance is designed to protect the members of your startup’s board of directors and the leaders in your company if named in a lawsuit alleging negligence, breach of fiduciary duties, or violation of provincial or federal law.
- Legal Expense Insurance: Often overlooked but a necessary coverage to include to your overall startup insurance policy is legal expense insurance. If you need to hire and retain legal counsel, the cost can run into thousands of dollars quickly. Legal expense insurance is your better option. It provides startup owners with access to legal advice with experienced lawyers and it covers the cost to retain a lawyer for a wide range of issues, including tax protection, licensing protection, employment disputes, contract disputes, debt recovery and more.
Who needs it?
The startup ecosystem is incredibly diverse, and no two companies are alike. Therefore, every startup requires an insurance policy that’s customized exclusively for them.
Moreover, business insurance is not a luxury item or something you can postpone purchasing. All businesses of any size and in any industry need to be protected from the potential risks they face as an essential part of their risk management and sustainable growth strategies. A valid business insurance policy will help you grow your startup, and it is necessary if you wish to rent or lease office space, book a spot at a tradeshow, or apply for a loan.
Regardless of what type of startup business you have, startup insurance is critical.
How much does it cost?
As an example, a startup business may be charged approximately $450 annually for a basic commercial general liability insurance policy with a $2 million limit.
Insurance companies determine what the cost of your annual premium is based on a variety of factors. These include:
- The type of industry you’re in and the services you provide
- The insurance coverages you choose
- Where your startup business is located
- If you have employees, how many you have
- What your annual and projected revenue is
- What your insurance claim history shows
In addition to shopping our partner network of more than 50 insurance companies on your behalf, your Zensurance licensed broker can advise you on the coverages you need and can recommend ways you can reduce any possible risks to help lower the cost of your policy.
Common claims scenarios
Frequently asked questions