This is a quick introduction to the solutions available to startups by Zyber Insurance. The foundational insurance package available to startups is the "Business Owner's Policy", which covers three things :
Insurance carriers may also offer different endorsements in the BOP to include coverage such as "employment practices Liability", "Equipment Breakdown", "Electronic Liability", "Crime", among others. Let's start with the basics, exploring "BOP" in the context of an online retail startup which owns a warehouse. Note that all the scenarios here are hypothetical. In order to comprehend your insurance policy and or an insurance quote, you have to read the terms and conditions to properly understand what is included or excluded, and always have the assistance of an agent licensed in your state.
BOP or Business Owner's is the fundamental insurance for a company, including Commercial Property, to protect you against theft or fire, for example. In connection with those damages, your policy may also include Business Income Interruption to cover the expenses while your company get back to business. If you have customers visiting your facility and or participate in trade-shows, for instance, General Liability is the insurance that will protect your company against bodily injury to a third party. The classical example for general liability is when someone falls down and may suit your company for compensation for the damages.
There are several other situations covered by other classes of insurance. If, instead, an employee falls down in your facility, as opposed to being covered by the Business Owner's Policy, you should also have "Workers Compensation" Insurance, which is mandatory in the majority of the states.
"Workers Compensation" is mandatory in the majority of the states and it will protect your
employees in case of bodily injury, covering medical expenses.
Some other classes of insurance to protect your company include :
Professional Liability (Protection for errors and omissions in specific professions)
Commercial Auto (Protection for the vehicles of your company)
Umbrella (To create extra protection beyond the standard liability policy)
In addition to the foundational insurance coverage, online retail also has several digital-related risks, and even though some BOP policies may also include basic coverage for business interruption due to a cyber attack, it may not cover ransomware payment or expenses for a data breach, for example.
A "Standalone" Cyber Insurance is the best option for a comprehensive protection for your company against cyber threats
A "Standalone" Cyber insurance became popular for being more affirmative in specific coverage. It may include protection for the following :
Extortion Threats and Ransomware payment
Replacement or restoration of data systems
Data Breach Expenses and Liabilities
Computer and Funds Transfer Fraud
Media Content Liability
Loss of Business Income
An online retailer must comply with the PCI regulations to process a customer's payment and most likely have a large amount of personal identifiable information (PII) which increases the risk of having a data breach. Businesses need to comply with general data protection laws and be exposed to penalties as well in case of a data breach.
If different than an online retailer, you are in the business of providing technological services. The insurance protection available that is bundled with the cyber policy in some cases is Tech E&O (Errors & Omissions) insurance, which is a professional liability policy specifically designed for tech professionals.
While Cyber insurance has evolved, another protection to be considered by an online retail startup is the mitigation of losses related to the unavailability of cloud providers. As you grow your business, the potential costs related to business interruption as well as customers that may not even return after getting frustrated if the site is unavailable will increase. "A Parametric insurance is different from traditional insurance and instead of paying the claim adjusted to the damage incurred, it will pay an agreed amount once an event is triggered. This class of insurance was first created to address risks in agriculture and it's now available to protect your company against technology systems downtime.
Cloud downtime Insurance is a good option for startups with high dependency on systems availability for monetization. Cyber Insurance may cover business interruption due to a cyber attack, but not necessarily if your cloud provider becomes unavailable due to a technical issue.
In addition to the digital-related risks, startups may also be exposed to lawsuits due to employee discrimination, and the founders as well as board members may also be exposed to fiduciary risks.
A couple of types of protection available to transfer these risks with insurance are :
Directors & Officers Insurance (D&O)
Employment Practices Liability (EPLI)
Finally, an important protection for an online retailer is the media liability that will protect against issues related to errors and omissions in advertisement.
Deciding which insurance to have as well as how to properly comply with the regulations is a detailed discussion that starts with the understanding of your specific needs. Risk management actually starts with the understanding of the risks, the potential impact and likelihood of them happening, as well as the controls available to mitigate and monitor the risks. For the case of cyber risks, the best combination is to properly invest in cyber security and transfer the residual risk to insurance.
Contact us to discuss your needs