Author: Frederik Wulff, https://markel.de/
Anyone who starts a company runs a risk. These risks are normally shared among the entrepreneur and the investors, in return for which the profits are shared among them as well. In some areas, however, the entrepreneur does not have to bear the risks alone. Insurance companies are interested in taking over some risk, depending on the business model of the startup.
Types of Insurance
First, one has to be clear about what and who will actually be covered and protected by the insurance. Many insurance products focus on the protection of the entrepreneur. All types of insurance are offered in Germany, ranging from private liability insurance products, household contents insurance products to pension products and private health insurances. In Germany, health insurance is mandatory for everyone, including those who come as entrepreneurs to Germany. However, if you only come temporary to Germany, for instance on a business visa, but do not have your permanent residence in Germany, a health insurance may not be mandatory, however, during the visa process you will need to prove that an insurance in India is covering any emergency situation. In Germany you can chose between a public or private health insurance. While a private insurance may be cheaper if you are younger, they tend to become pricier the older you get. Also, shifting to a public insurance later on may be difficult if you opt for a private insurance in the first go.
Besides personal coverage, the protection of the startup is crucial as well. There are usually two broad insurance categories. On one hand, there are third-party liability insurance products and on the other hand, there insurance products against first-party losses.
Finding the “right” insurance company
There is no standard advice on necessary insurances for entrepreneurs and startups. In contrast, it is best if a startup obtains expert advice from a professional who understands not only the range of insurance products but also the risks for startups. The entrepreneur or the startup then can make an informed decision based on the advice they have received.
Caution must be exercised when mixing private and commercial insurance. While some insurance providers highlight mixed insurance products as an advantage, problems can quickly arise from using a mixture of private and commercial coverage. For instance, commercial insurances demonstrate taxable financial advantages. However, it may look suspicious to the home and revenue office when the company is paying for an insurance policy that only or chiefly benefits one person. Mixing insurance products can become problematic when damages are reported in the private sphere which suddenly drives up the premiums for the company insurance. This can quickly lead to tension. There are numerous professional insurance agents in Germany. It is, however, important for startups to obtain advice from an agent who not only understands the insurance sector but also the startup world. That narrows down the field significantly. An insurance company targeting young entrepreneurs is Hiscox (https://www.hiscox.de/versicherungen-fuer-gruender/).
|Product||Relevance||Function||Example of Damage|
|Commercial liability insurance – for offices||Very important||This insurance protects against damage to persons and property which could occur in an office||A customer or business partner enters the office, trips over a computer cable and injured himself.|
|D&O (directors’ and officers’ insurance)||Important||This insurance protects management board members and staff in management positions against personal liability in their corporate roles.||As managing director, one obtains the advice of an expert to draw up a complicated contract and as a result the company incurs damage.|
|Contents insurance||Less important||The insurance is designed to repair or replace damage to the office fixtures and fittings such as office furniture, PCs, printers.||The seal of the kitchen tap is not watertight. Over the weekend water accumulates in the office and damages furniture, carpets and computers.|
|Financial loss liability insurance||Important||This insurance protects against damage to financial assets which results from professional oversight or mistakes due to calculations errors, forgetfulness, writing or typing errors, misleading and misspeaking.||An online sports equipment business accidentally uses images protected by copyright assuming that these are license-free images.|
|Cyber insurance||Important||This insurance protects against financial damages that can occur from Internet use, such as data theft or computer fraud.||In the course of a marketing campaign, a staff member sends out an internal document in error with all client contact information, including order data, addresses and bank details.|