You’ve taken the leap and started a new company which you hope will fill your need to do things differently, better or improve the world in some way. With it you are brimming with ideas, drive and motivation - planning your budget, organizing marketing campaigns, hiring staff, looking for office space... This list is almost endless and can be daunting at times. But you press on and check off the endless items from the endless to-do list.
In many instances, insurance is perhaps the last thing on the list, but protecting yourself and your company is a vital part of managing the risk inherent in a start-up. From the moment you pay for your business license and begin trading, it doesn’t take much to quickly run into financial trouble and without adequate protection for the business, its assets and yourself, you are left vulnerable. However, despite what many people think, managing the risk through effective cover and protection doesn’t need to cost the earth and can be kept within an affordable budget.
As a start-up, you want to be mean and lean with your finances and your operations, to start quickly, harvest the low hanging fruit and build a solid foundation to build upon. To limit your financial exposure with insurance, seeking out a plan with a higher deductible could result in lower monthly premiums and less pressure on your cash flow.
Below we take a look at the most vital types of insurance that start-ups in Hong Kong should consider.
Commercial General Liability or “Slip and Fall” Insurance
In layman’s terms Commercial General Liability (CGL) insurance is commonly referred to ‘slip and fall’ insurance and concerns negligence toward a third party. A CGL policy can actually cover a lot more than this and will extend to cover the majority of property damage and bodily injury caused by your employees or your company.
Often this is contractually required when you enter into an agreement with a vendor or distributor. In short, this type of insurance is a must for any business.
Some Examples of CGL Claims
Bodily injury or property damage where the injured party can prove that you were negligent. Examples includes an employee slipping and hurting themselves on a wet floor or falling down steps that were not clearly illuminated
Product liability –Think bodily injury or property damage due to your product or service. An extreme example could be a child choking on your product.
Employee Compensation Insurance
This insurance protects your employees. Work places injuries and sickness are not uncommon and the legal ramifications of not having insurance to cover your employees from injury and loss of earnings can be disastrous for you and your company.
ECI or Employers Liability insurance is a statutory insurance product. The means that if you do not put this policy in place for your employees you are in breach of the EC ordinance – which means you are breaking the law. In short, this is another type of insurance that you must have.
Some Examples of ECI Claims
Employees that are injured during their work – Think slipping or falling or even long term injury or sickness due to occupational hazards.
Damage to employees eyes due to years of excessive screen work – Think early onset macular degeneration.
Professional Indemnity Insurance
In the everyday running of your company the advice or service that you provide to your clients can leave you exposed to legal recourse and thus liable.
You may not have done anything wrong, but once an allegation of negligence has been made against your company or its employees you are required to seek legal advice to defend your company.
A Professional Indemnity policy can cover your legal defense cost, and if it is proven that you were negligent in your advice or the service that you were providing, this type of insurance will cover your awarded damages to the third party. This is the third of the “must-have” insurance types for any start up.
Some Examples of Claims
In uploading a new software program for a customer, a malicious code is inadvertently transferred to the network, causing loss of data and disruption to operations. The virus then spreads to the client’s computer system; there is then widespread loss of data and a computer network shutdown causing financial losses.
Cyber Liability Insurance
With the development and widespread adoption of the internet to conduct business and use tools such as cloud computing, many people and companies are now greatly reliant on the web to run their operations, Cyber liability insurance helps mitigate the costs from data breaches and the loss or theft of third party data.
Losses covered can include lawsuits, data restoration costs, breach notification costs and regulatory costs. Cyber policies also often include 'E-Business interruption insurance’ which can cover the company’s expenses (and the lost profits, in some situations) if your company needs to temporarily prohibit access to the product/service after a data breach. This is a significant advantage and level of protection for any business that conducts business on the internet and uses it to engage with clients for data-sharing or financial transactions.
Some examples of claims
- A lawsuit stemming from a security failure or alleged technology error that results in damages to customers businesses or data
- A lawsuit alleging trademark or copyright infringement
- An e-business interruption resulting from a security failure or Internet virus
- A cyber extortion threat – think Ashley Madison!
For more information or advice on any of the above contact [email protected]