Insurance For Startups & Early Stage Businesses

As of 2022, there are over 30mil startups and small businesses in the US. Which is pretty amazing when you think of the number of jobs these companies have created.

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A startup is a new or young company founded to develop a product or service, enter it into the market and scale its customers. They can be backed by venture capital, but are often times self-funded or bootstrapped without any external investment. In fact, most startups are not funded by outside capital and are built on personal savings and finance.

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High-growth, ventured backed companies usually start their company with an idea, then raise a series of seeds or small rounds, and eventually go through a series of larger investment rounds from private or institutional investors (series A, B, C, and more). Successful companies that reach over a $1bil valuation, known as "unicorns", eventually take their companies to the public market and offer ownership to everyone.

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Startups work like any other size company - they have people, property, and work with other third parties like customers, vendors, partners, and more. Whether they want to disrupt a traditional industry, or innovate the word, founders of startups begin with a dream, put in the work to make it a reality, and strive to scale it quickly.

The different types of insurance and risk management practices a startup or early stage business should consider depend entirely on their operations. A technology company creating software as a service will require much different insurance than a food manufacturer making ready-to-cook home meals. That said, any business has the same high-level types of exposure. These three core exposures are the fundamentals of a complete insurance portfolio.

• Their People: anyone who is part of the organization - employees, investors, board members, executives, founders, and their families.
• Their Property: any property that is owned, rented, or leased, by the business - office furniture, equipment, buildings, improvements, vehicles, and much more.
• Other People: everyone who is not part of the organization - customers, vendors, partners, and other third parties.

If the business is a one-person company, here are the most common coverages all startups should have:

• Commercial General Liability: protects your customers, clients, and other third parties from bodily injury or property damage.
• Product Liability & Recall: insures the business if you are sued due to a product your sell, design, manufacture, or distribute.
• Commercial Property: covers your business property or rented/leased equipment
• Cyber Liability & Data Breach: defends your business from cyber attacks and data breaches

If the business has employees or other people that work for the business (part time and sub contractors), then they should have the following:

• Workers Compensation: pay medical bills if your workers get injured
• Employment Practices Liability: defends your business from wrongful termination, sexual harassment, discrimination, and more.
• Commercial Automobile: pays excess liability if your worker gets into a car accident while working.
• Commercial Crime: protects your business from employee theft of funds, property, and more.
• Fiduciary Liability: insures employee benefits packages like retirement packages.
• Group Health Insurance: individual health insurance for employees - paid for by the business

If the business raised venture capital or has a board of directors, then they should carry the following:

• Directors & Officers: protects the individual assets of directors, officers, and executive if they are personally sued.

If a founder or other employee is vital to the operation and would put the entire business at risk if they were injured or died, then they should consider:

• Key Person Insurance: pays a benefit to the business if a key person dies.

TIP: our advisors will do a free consultation call, video conference, or in person meeting to analyze your business and provide recommendations specifically for your business. We design starting packages and check in monthly to strategize adding coverage or limits based on the growth of your business.

The total cost for an insurance package covering your startup depends on various factors. Often, if your business qualifies, you can package a lot of the recommended coverages under one policy known as a Business Owners Policy. Either way, the cost of insurance depends on the following factors:

• Business Operations: an office-only business will pay much less than a manufacturer.
• Total Projected Sales: a business doing $500K in sales will pay much less than a business doing $25m in revenue
• Number of Workers: more people create a higher chance of losses
• Number of Locations: more locations to insure create higher premiums
• Territory of Operations: domestic only pay less than domestic + foreign operations
• Risk Management Safeguards: business practices like alarms, employee handbooks, and cyber defense systems decrease premium
• Prior Claims & Lawsuits: insurance carriers charge more if you have prior losses or lawsuits. Insurers are businesses and if they deem you a company that will cost them money, they will charge more.

On average, a startup pays anywhere from $2,000 a year for the most basic insurance package, but pay up to $7,000 to $10,000+ if they include all the necessary coverage. Below are the average prices for each key coverages we mentioned above:

• Startup Business Owners Policy: $500 to $1,000 a year
• Commercial General Liability (CGL): $300 to $750 a yea
• Commercial Property: depends on price of property - 1% to 5% of the value
• Product Liability & Recall: $250 to $500 a year
• Cyber Liability & Data Breach: $400 to $750 a year
• Business Automobile: $200 to $500 for non-owned, $2,000+ for owned autos
• Commercial Crime: $500 to $750 a year
• Fiduciary Liability: $400 to $600 a year
• Group Health Insurance: $300 per person
• Workers Compensation: depends on type of worker 0.1 to 1% per $100,000 in payroll
• Employment Practices Liability (EPLI): depends on number of employees - $250 to $500 per worker
• Directors & Officers (D&O): $2,000 to $5,000 a year
• Key Person Insurance: $1,000 to $5,000 a year

Call, text, or email us today, or schedule a meeting, and speak wit a Fullsteam Cannabis Advisor. You deserve a specialized insurance agent, modern processes, and an insurance carrier that has your back.

The process to get insurance is an easy and straightforward process. You get us the information we need to engage insurance providers and we'll supply the best possible quote(s). We're also real people that probably live in your city, and we value relationships, so meeting in person is always an option. At the end of the day, our job as brokers and advisors is to educate you on what everything means. It also helps us to understand your business and insurance needs, so we can get underwriter comfortable with quoting. We'll help you understand insurance and risk management practices, and be there for you as the business grows.

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Some traditional businesses can move through the process faster as a lot of underwriting is supported by artificial intelligence, but most policies today will be reviewed by an actual person. We have decades of experience working with the underwriters at each insurance company, and pitch your business to each of them. We work with and for you.

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The standard process to produce quotes for your business is as follows:

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1. Advisor Introduction: this can be a quick phone call, email, video conference or in person meeting. You'll decide if you enjoy the advisor and trust their advice. This is also where you'll be able to ask questions, provide information about your operation, and go over the process to get insured.
2. Data Collection & Underwriting: this is where you'll get into the fine details about underwriting questions and information that will be necessary to engage the insurance market. You'll be able to chose from filling out PDF's, going through our smart-form technology, or provide it all over the phone, email, or in person.
3. Quote Proposal & Review: once your advisor has the information needed for underwriting, they will work with the insurance market to produce quotes. This can take a day or up to a week, depending on the time and operation.
4. Finalize Coverage: here you'll decide the coverage to move forward with. Final steps include signed documents, payment, and selecting a specific start date.

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ADIVSOR TIP: Be prepared to spend 5-10 minutes with your advisor to break the ice and get the ball rolling. Once aligned, your advisor will create clear next steps and create a timeline for quotes. If your business is new, and has unique risks, then you should expect a little back and forth.

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Get in touch with your advisor, or send over the details digitally today.