Get Covered: 8 Times It's Absolutely Necessary to Have Business Insurance

Business.com / Insurance / Last Modified: February 22, 2017

Confused by all those policies and legal agreements? Here's how to make sense of them, plus the breakdown of what you really need.

These entrepreneurs from YEC cover every industry from party rentals to law practices.

We asked them to share surprising times when you should get business insurance and how to decide which policies are right for you.

Make sure you and your company are protected before hitting the next milestone.

Related Article: 9 Ways to Save Money on Business Insurance

1. When You Go Into Retail

A consumer goods business needs business insurance -- general liability insurance, in particular -- as soon as they look to go to retail. Many retailers will expect between $5-7M in liability insurance. It is also important for companies to get directors' and officers' insurance as soon as they start to form a Board of Directors that includes non-founding members. These insurance programs will cost roughly $20K/year. – Dan Aziz, Luna Pharmaceuticals, Inc.

2. When You Rent Space

Every landlord will require “business insurance.” So, if you are going to rent space, this is a no-brainer. We also have an "Errors & Omissions" policy that covers us from claims of negligence and failing to perform our professional duties. Some larger companies will require vendors with whom they do business carry an E&O policy. If you want to play with the big dogs, then you’ll need to up the ante. –Yair Flicker, SmartLogic

3. With Your First Sale

Liability insurance is the most important and should be in place very early. Business property, cyber, non-owned auto and all of that other stuff is good, but secondary. Like cars, what you should be more worried about someone suing you than your car's damage in an accident. – Wei-Shin Lai, M.D., AcousticSheep LLC

4. Sooner Rather Than Later

Most businesses should have four lines of defense: 1) providing exceptional customer service, particularly when things go astray, 2) solid legal agreements, 3) customized business insurance and 4) a legal entity. Strategic, tailored business insurance can provide the resources necessary to help make sure that all of your efforts will not be swept away due to one bad incident. – Doug Bend, Bend Law Group, PC

5. If You Become a Subcontractor

Although I recommend getting insurance from the beginning, an entrepreneur should definitely consider it if you become a subcontractor. Often, prime contractors will have a lot of requirements and stipulations, so you want to make sure that your company is protected. Types of insurance can include professional liability and E&O (errors and omissions). – Tamara Nall, The Leading Niche

6. If You're a Rental Company

Liability insurance protects my party rental business. The market's filled with small companies that can't afford it, but large customers like schools require coverage, so that sets us apart. It's socially responsible to protect customers in case something goes wrong. The insurance company inspects our inventory regularly which also helps ensure quality and safety. – Robert De Los Santos, Sky High Party Rentals

7. If You're Seeking an Investment

Directors' and officers' insurance is a must if you're at the stage where you're seeking VC investment. You can make it to MVP and even growth with independent contractors and no physical office, which removes the need for other kinds of insurance, but it's very important for the actions you take in the interest of the company to be protected once you're considering having outside shareholders. – Dave Nevogt, Hubstaff.com

Related Article: To File or Not to File: A Business Insurance Claim

8. When You Have Employees

As a startup entrepreneur, the furthest thing from my mind was insurance. To me, it seemed more sensical to spend money on "more important things" like user acquisition and computers. However, one area that I highly recommend you research and make available is disability insurance. This will help employees who become disabled for whatever the reason receive benefits up to 90 percent of their salary. – Obinna Ekezie, Wakanow.com

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