Tech Startup Insurance FAQ
Insurance policies are hard to understand no matter what they cover, but when you’re starting your own tech business, it can be overwhelming to say the least. Tech startups bring a whole new light to the insurance situation as well, since they will need certain types of insurance to meet their specific needs. Accidents happen all the time, and you’ll need to be insured to protect yourself, even if all of your data and information is stored on the cloud. If you’re starting a new tech company, you probably have some questions, and we’ve taken the time to answer some of them.
Q: Why do I need to insure my tech business?
A: Over 50 percent of startup companies fail within the first five years, which is due in part to the fact that more than 73% percent of businesses don’t have cyber liability insurance, putting their stability at serious risk. Business insurance may seem like a luxury for your business type, but it’s necessary to protect your data and assets against cyberattacks.
Besides dealing with cyberattacks, you’ll also need insurance to guard against liability, disgruntled employees, your property, your own life, and much more. Read on to discover more about the need for these insurance types.
Q: What is E&O and Cyber/Network Liability, and why would I need it?
A: Errors and omissions insurance (E&O) protects you from disgruntled clients; shielding you from claims of negligence and people using your words against you. A client may claim that you failed to perform as promised or that their financial loss was caused by an error of omission on your part. E&O insurance offers you legal protection for such claims.
Cyber/Network Liability is insurance that protects the 83 million online companies exposed to security breaches. If a network goes down or private information is leaked and money is stolen from private accounts, Cyber/Network liability insurance will protect your assets. Essentially it protects you from cyberattacks, and tech startup companies usually add this insurance to an E&O policy to enhance their protection.
Both of these policies are extremely important for tech start-ups. Cyber-attacks and glitches in technology are common, and if you aren’t protected, you’ll experience serious financial repercussions when a client makes a claim.
Q: What questions should I ask a potential insurance company?
A: You shouldn’t invest in tech startup insurance until you understand the process and have chosen the right company. Asking questions is the best way to ensure you’re going the right route, and the questions you should ask your insurance company for tech startups aren’t much different than the questions you would ask a normal insurance company. Use some of the following questions to help you form a list of your own.
- Do you have professional indemnity coverrage?
- How will we communicate throughout our relationship?
- May I call you after hours?
- Who will be taking care of my account, and can I speak with them?
- What is my current risk assessment?
- May I see an itemized receipt of the coverage we discussed?
- What exactly is guaranteed with each of my policies?
Use these questions to jump-start your interview, but if you think of others that will benefit your company specifically, add them to the list.
Q: What types of insurance do I need?
A: The majority of tech startup companies will need insurance to be successful. They include the following:
- E&O and Cyber/Network Liability: See question above for details.
- Employment Practices Liability: In essence, this policy protects you from claims made by employees, such as discrimination, sexual harassment, and wrongful termination.
- Worker’s Compensation: Even if all your employees do is work at a desk, you need worker’s compensation to protect you against any claims of employees being injured on the job.
- Commercial General/Commercial Property Liability: Both of are necessary for protecting your property. Commercial general protects against property damage or bodily harm to a third party and commercial property protects against anything that happens to or on company property.
- Key Person Insurance: You may be in great health now, but you won’t be around forever, and if you want your company to be protected in the event of your death, you need key person insurance to protect your interests.
- Directors Liability: Tech startups rely heavily on data storage. In the event that you lose some of that data, you could be sued personally as the director of the company. Directors liability insurance protects you from such lawsuits.
Q: How can I best protect my company from a cyber-attack, and what do I do if it happens?
A: Hackers make millions of attempts on companies all over the world each day, and that number is only growing, putting you at a higher risk for cyberattacks than ever. If you’re targeted, the best thing to do is get the right protection ahead of time with an insurance policy that will compensate you for anything lost. You should also develop IT policies that will help protect your company from unintentionally downloading viruses or accessing websites known to carry viruses. You should also keep your systems updated and back up all of your data. Then, make a plan of action to follow in the event that a cyberattack occurs.
If you experience a cyberattack after implementing these measures, default to your plan. This plan should include taking proper steps to shut down your website, in order to protect against further data loss, calling your insurer immediately, talking with your IT department about the next step, and allowing IT forensics experts investigate the attack.
Q: How will I choose a policy that’s right for me?
A: Each type of insurance offers several policies to choose from, and you need to find the one that offers the best return on investment. In order to determine what that is, have a conversation with your insurance broker. Discuss your risk assessment and determine which policies will offer you the best protection, no matter where an attack originates. Talk about what is covered under each policy, and if you’re worried about a specific aspect of your business, ask about your options for having that feature covered.
Q: How can I get in contact with an insurance agent?
A: The most important attribute of an insurance company is that they are available. They should be there to answer any of your questions and offer you the protection you need. If you’re in need of an insurance agency that values customer service and solid policies over anything else, please contact us today.