You have an idea, you have identified a market gap, you solve a problem, you have the talent, and finally you have decided: you are going to set up your company. It is a moment full of hope. But after the initial excitement questions arise and the first decisions have to be made.
Getting started is a process that does not have to be complicated, but doing things well is not as easy as it seems. From the registration and registration of the company, the distribution of shares and statutes, to the necessary bank and tax accounts, everything can be very difficult if you do not have professionals to advise you or institutions to support you in the process.
Luckily, there are entities specialized in giving support to new companies throughout the entire process, and also public administrations that incorporate more and more facilities and incentives aimed at entrepreneurs so that they can start their activity.
One of the most important things to consider at the beginning is insurance. Yes, we already know that insurance is unattractive, but it is also usually the great unknown, and doubts about what is and what is not mandatory in terms of coverage for the activity of your startup will be one of the first questions you will ask yourself.
Compulsory insurance
The good news is that there is really little insurance that is strictly mandatory for a technology-type startup or in the field of innovation:
- Occupational accident insurance: If you have workers and you are, therefore, subject to a Labor Agreement, you will have to take out the Agreement Accident Insurance. With this policy you will compensate your employees in the event of an accident, disability or death.
- Vehicle insurance: As for any vehicle, if your company uses a car or any other type of transport or fleet, you must have your policy in force.
Is it done? Well, then there are those linked to your specific activity? If your sector is construction, it is likely that you have to have Decennial insurance. Not much more, though… Given this, you are probably wondering right now if you need Civil Liability Insurance (and if not, you probably should).
Social responsibility insurance
Do I need to hire it at the time of creating my startup?
Again, depending on your specific activity, you may be required to do so. Civil Liability insurance is mandatory for companies and professionals:
- Sanitary
- Lawyers
- Insurance brokers
- Financial intermediaries
- Bankruptcy administrators
- Shows or recreational activities, celebrations and pyrotechnics
- Public and school transport
- Travel agencies
- elevator companies
We understand that a startup is a recently created company or freelancer, with an important technological base for the development of a fast-growing service or product and with the possibility of short-term investment. But if your focus of action is in the exposed sectors, contracting civil liability insurance will be mandatory.
For the rest it is not mandatory. Either way, the key question is, “Even if you don’t have to, should I hire you?”
And the answer is clear: yes, without hesitation. The RC insurance will cover your business against possible claims that a third party may make to you: employees, customers, suppliers, etc. Therefore, protect your assets, something fundamental both in the beginning and in the growth of the company.
And it can be of several types:
- General Civil Liability: Covers claims for damages caused to a third party that occur while carrying out your activity. It is usually a large amount (hundreds of thousands of euros) to fully cover any problem in this regard, since the compensation to be covered can be really high.
- Product Civil Liability: Claims for damages caused to a third party, due to an error or defect in one of the products you sell. As in the previous case, they can be very high.
- Professional Civil Liability: Covers damage caused to a third party by the advice or service that you offer from your company.
- Civil Liability for Data Protection: Covers third-party claims in the event of involuntary breach of the Data Protection Law.
Civil Liability insurance is so important that it is often counted as compulsory, although strictly in some cases it is not. There are many suppliers, clients or investors who will not give the go-ahead to a startup that does not have this insurance, since not having it leaves the company in a serious situation of vulnerability in the event of any problem or claim.
This is something that founders do not usually take into account, either because of knowledge, because of their focus on their business-idea, because of time or even because they do not consider that anything can go wrong and they assume the risk. Bearing in mind that it is not expensive insurance and that contracting it is not usually complicated; it is a big mistake not to have RC coverage from the beginning, especially to work with the peace of mind of having any claim covered and being able to put all the strength in the project.
Optional insurance (but recommended)
Anything else? You are right. Because of the basic insurance, whether mandatory or not, there are a lot of insurance offers that are highly recommended, positive and even economic, adapted to the business and idiosyncrasy of startups. For example:
- Cyber
risk insurance: You can really cover many more cyber risk operations than you think, with the clear limit in any illegal activity (for example, payment of ransoms for data kidnapping). But at least we recommend those insurance offers that cover the damages that you may cause to third parties due to attacks or virus-Trojans, type RC by virus. This would be enough at the beginning, although it is advisable to grow in coverage in the first months of the journey. Keep in mind that if your company is a provider of computer consultancy, this insurance will be the basis for you and your clients, although due to the nature of your business, the cost may be higher. - The premises-commerce insurance: Coverage that will range from covering the RC in the event that your activity causes damage to the premises you have rented (highly recommended for a startup), to more specific insurance for offices and warehouses, whether rented or owned. .
- Accident or sick leave insurance: That will guarantee you an economic contribution to cover fixed expenses in the event of an accident that paralyzes your activity.
- D&O insurance (administrators and directors): Especially important when external investors, funds, VC begin to enter, or investment-financing rounds begin (or even for grants). This is insurance for the responsibility assumed by administrators, co-founders or entrepreneurs, to which they respond with their own assets.
- Life insurance on key people: Whether it’s the CEO or the founders, what happens if they are unfortunately missing at some point? This insurance will cover the company for the damages that your dismissal may cause in the organization.
- Device insurance: Covers all the equipment, technology, furniture and other devices you have in the office to carry out your company’s daily processes normally, whether due to accidental damage or catastrophe.