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Fact: One of every four private companies during a three-year period in the United States experienced lost a legal claim made against their Directors & Officers (D&O) liability.
There's a real threat to directors and officers running startups in their infancy.
Startups have a difficult time getting insurance due to their limited financial history.
CoverWallet offers a customized bundle with the right coverage for a startup’s executive teams. We take a data-driven pricing approach to offer you highly competitive prices.
Our team of experts in startup-insurance are available to walk you through the different coverage options for your new small business.
Management liability insurance for Startups can save your business the costly litigation and claim settlements, while helping to protect your company’s hard-earned reputation.
What is covered by Management Liability?
Why do I need Management Liability Insurance?
Losses related to the actions of directors and officers are more common than many realize. A single loss could be devastating to a growing business. Without proper protection, including directors indemnity insurance, businesses face sizable exposure that can affect cash reserves, working capital, or even personal assets.
In most cases, businesses face D&O related lawsuits from customers. But vendors, government agencies, regulators, partners, and shareholders can also file legal claims against your company.
Costly litigations, lengthy court process, legal defense costs, and damage to your business reputation all wear on a business, causing a decrease in productivity and a decrease in morale.
Without the coverage provided by directors and officers liability insurance, even a simple allegation, regardless if it’s true or not, can be costly, and time-consuming, and an unproductive distraction from the needs of the business.
What is covered by Management Liability?
From injury claims to property hazards and professional perils, the long list of unplanned situations and circumstances makes every business exposed to certain risks and liabilities.
An insurance policy specifically designed to cover management liability picks up when General Liability policies leave off, protecting businesses and key officers against claims along with associated expenditures.
The Management Liability Startup Package is a combination of three different types of insurance:
What are the benefits of getting Management Liability Insurance for Venture-Backed Startups?
Rating Factor VC based rating factor to account for the most recent lead investor. We leverage the research, due diligence, and resources provided by the policyholder’s most important investors to better understand their exposure.
Broad Subsidiary language In the event of a claim, a startup may have its own choice of counsel and feel most comfortable with the opportunity to involve someone they trust. This policy allows for that.
Employee Stock Ownership Plans Employee Stock Ownership Plans (ESOPs) are key to the Startup’s founders and employees. Founders rely on them to attract talent and motivate employees. However, due to their personal nature, these plans can create unexpected exposure for companies. The Fiduciary coverage in this product covers ESOP programs and benefit plans up to the full Fiduciary Limit, adding insurance security to a key tool for acquiring talent.
Lowest Retention amounts As a result of the underwriting approach, the CoverWallet Management Liability program offers one of the lowest Retention amounts available in the California marketplace (the epicenter of startup activity), at a minimum of $10,000. Most carriers are providing a minimum $25,000 retention or higher in California.
Wage & Hour coverage Through the Wage & Hour coverage (Defense Costs Only) this product provides startups with the protection needed for the Fair Labor Standards Act exposures. These claims tend to be high hazard and extremely expensive.
Third-Party Coverage Startups are lean and interact with many outside individuals and vendors every day. This increases the potential exposure and risk associated with a third-party’s interaction with the startup’s employees and locations. The EPL coverage provides cover for any Third-Party EPL up to the limit in the event an outside party sues for perceived harassment or discrimination. This will also cover claims from candidates seeking employment, which is crucial to a startup that is quickly growing its headcount.
In line with Evolving organizational structures Startups typically have an evolving organizational structure and corporate protocols, which means that some issues may not get escalated immediately or handled and unnecessary risk is created. This product limits the knowledge of potential claims to Senior Management only as the Control Group, meaning coverage for claims may be available unless Senior Management was aware at the time the policy was put into effect.
What are the advantages of CoverWallet’s Startup Insurance Package for VC-backed companies?
Startups are often denied coverage or face high premiums from carriers who have a hard time classifying their business into traditional categories and working with the unique financial characteristics of high growth companies.
We understand startups and we understand insurance. Our approach to Management Liability is different from other companies, and we can help save you time and money, while getting you the best possible coverage.
CoverWallet’s insurance package for venture-backed startups leverages a proprietary algorithm that ranks institutional investors that typically back startups into tiers based on their track records and due diligence processes.
For example, if you are backed by Index Ventures, Andreessen Horowitz, or another firm, our algorithm looks at their history to help evaluate your risk.
The reason for this is that VCs typically do a lot of risk assessment in their due diligence process, which means that we don’t need to ask you all the same questions to understand your business’s unique exposure.
Additionally, while some companies offer startup insurance that is non-admitted, our insurance product is fully admitted.
An admitted product is one that has been approved by a state’s insurance regulators, which should provide you more peace of mind that you are getting the right coverage.