Thursday, January 17, 2013

What Insurance Should a Technology Start-Up Consider?

Is your tech company protected properly?

At different stages of the Start-Up process, you may want to consider different policies. 

In the beginning stages you may want to pick one or two of the following policies because of limited resources. 

Once you procure funding and are trying to attract the best of the best, you may want to purchase all of the policies below.

Here are the policies you may want to consider in no particular order:

Technology Errors & Omissions (Tech E&O) – Insurance for failures in your technology service that could cause customers damages. Tech E&O is most likely your most important policy because most everything you do would be considered a professional service and is excluded from the General Liability policy.

•Data Breach/Privacy Coverage – In case you lose sensitive employee or customer data, this policy pays to notify, monitor credit, and anything else you need to do in case of a breach.

•Media Coverage – If you are doing any kind of media/social networking. Some of these coverages are added automatically to the Personal & Advertising injury section of the General Liability policy, but are explicitly excluded for companies with a media focus. Examples of these exposures include: unintentional copyright violations, libel, slander, etc.

•International Coverage – If you have operations outside the coverage area (US, US Territories, and Canada)

•General Liability Coverage – This is your most basic insurance that most contracts will require: covers basic trip and fall. You can also add supplementary auto coverage for rented and non-owned (including employee) vehicles. If you have company vehicles, you should consider purchasing a Business Auto Policy.

•Property – Cover your computers, servers, tenant improvements. In addition, business income is added to this policy; look for coverage including business income for Denial Of Service attacks, etc.

•Directors & Officers – Insurance if you have investors or stakeholders. Directors and Officers can be held personally liable for decisions of the company, so this coverage can be crucial in securing high profile board members.

•Disability – Insurance for the owners if they are in an accident and no longer able to work.

•Key Man Life – Insurance policy in case something happens to your partner. Both partners buy life insurance policies on each other, so they can buy out the partner’s share. This way you avoid becoming partners with that person’s significant other.

•Health Insurance – Great way to keep your employees on board and attract great talent.

•Workers’ Compensation – Mandated by CA state law even if you just have one part time employee. Good news is that rates for most technology workers are very inexpensive.

•Employee Practices Liability – Protect yourself from employment related lawsuits: wage & hour, wrongful termination, discrimination, etc.

Some of these policies are offered in packages, while others are sold separately. Most large companies that contract smaller technology services companies will require you to have General Liability, Technology E&O, Workers’ Compensation, and Business Auto.

Talk to an independent agent to see which of these coverages would be a best fit for your business.

This article was originally published on the Co-Merge website on Jan 11, 2013.