3 Insurance Policies Every Startup Founder Needs

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SDS 063: 3 Insurance Policies Every Startup Founder Needs

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I’ve had a tough weekend that got me thinking about the value of insurance coverage.

As you build your startup, it’s easy to focus only on growth and overlook risks. But protecting your company and team early on is key to long-term success.

At the seed stage, you’re likely focused on product-market fit, building your team, and closing funding rounds. Yet, one area many founders forget is insurance coverage; something that’s increasingly required by investors and regulators.

Today, I’m sharing three essential insurance policies every seed-stage founder needs. These aren’t just optional. They’re critical for protecting your business, your board, and your team.

D&O Insurance

If you’ve raised funding and have a board of directors, D&O insurance is a must-have. It protects your leadership team and board members from legal claims related to their decisions or actions while serving the company.

Let’s say an investor or stakeholder sues the company for alleged mismanagement. Without D&O insurance, the legal costs, and any potential damages, could drain your company’s funds or even your personal savings.

Quick Thought: If you’ve just closed your seed round, prioritize getting D&O insurance before your first formal board meeting. Institutional investors often require it, and having it in place shows you’re serious about running a professional operation.

Employee Life Insurance

If your startup operates in a regulated industry like fintech, healthcare, or insurance, you may be legally required to provide life insurance for your employees.

Beyond meeting regulatory requirements, offering life insurance shows your employees that you value their well-being. It’s a small but impactful way to build trust and foster a positive company culture.

Quick Thought: Check with your legal counsel or compliance expert to confirm any industry-specific requirements for employee insurance. Then, find an insurer who specializes in working with startups and can offer flexible plans.

General Liability Insurance

General liability insurance protects your startup against claims related to property damage, bodily injury, or advertising errors. It’s a foundational policy that ensures your business can handle unexpected legal or financial challenges.

For example, imagine a situation where your product causes unintentional harm or a visitor gets injured at your office. Without general liability insurance, your startup could face costly lawsuits that might derail your progress.

Quick Tip: Look for insurance providers that offer tailored policies for early-stage startups. This ensures you’re covered without paying for unnecessary extras.

My Two Pesewas

Insurance is like a safety net. You might not think about it until something bad happens, but as a founder, it’s your job to prepare for the unexpected.

By securing these three policies early, you’ll not only meet legal and investor requirements but also position your startup as a credible, well-managed company.

If this resonated with you, share this newsletter with another founder you know.

That's all for today. As always, thank you for being an engaged reader. Let me know your thoughts on this issue. I’d love to hear your experiences or tips on navigating tough decisions in leadership.

Until next time,

Jasiel

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