What Do I Need to Have vs. What Should I Have?
Creating a tech company from scratch is a process that will often be equated to a wild ride regardless of the outcome. In the early days, the insurance mindset is drastically different than when the company matures. Somewhere along the way an epiphany happens with regard to many aspects of the operations. Insurance is no different.
In the early days, most startups are only a founding team of ultra-risk tolerant souls all wearing multiple hats. When we help start an insurance program, it is typically driven by what insurance the startup needs to have. For example, we need to have a certain limit for a client contract, a commercial real estate lease, or a term sheet. Often times the limits are bumped up, or another line of coverage is added only when required by contract and is unsuccessfully negotiated down by legal counsel. It is common and certainly understandable for most of our clients to start out with this mentality.
However, there is often a dramatic mindset shift with regard to insurance in the more mature stages of a company. At a certain point a seasoned COO and CFO are often hired and the founders start to delegate certain duties such as finance, HR and operations. Those founders who had worn many hats were now delegating certain responsibilities to newly hired specialists who have seen this movie before. This is certainly where most of our clients start to have an insurance mindset shift as well. Many times our clients begin to ask a richer set of questions about coverage. Sometimes they look at more than just the price and high-level limits. At that point they are more concerned with ‘what should I have’ than the bare minimum I need to carry to be in compliance with my contracts.
There are good times to remember to reach back out to your broker here. Any time a founder offloads the insurance program is one. It is a good time to get your service team and the new hire introduced and have a conversation about your insurance program. Renewal is another good time to evaluate coverage. As renewal terms are released, it is a good time to take a look at the coverage types, limits and deductibles vs payroll, revenue and operations.
As always, discuss major changes in operations or funding with your account manager or broker. You will be glad you did.
About Lumen:
Lumen Insurance Technologies is a tech-focused commercial insurance agency based in Austin, Texas. Lumen is hyper-focused on providing the technology startup ecosystem with quality commercial insurance coverage (e.g., D&O, E&O, Cyber, etc.) following a funding event and beyond.
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