Founder: Don’t neglect precautions – protect yourself against risks

Founders have their hands full when building their own business. This can lead to neglected planning. Before a rude awakening occurs in the event of a disaster, smart tradespeople take precautions. Because safety can't be postponed.

This article is part of the special feature GründerNavi – for founders and young companies

Founders are primarily characterized by a good business idea – less often by ample financial reserves. That's precisely why insurance policies are essential . The less a company has in reserve, the better it needs to protect itself. The principle here is: insure as little as possible, but as much as necessary.

Existence-threatening risks come first

The crucial factor when choosing the right insurance is whether the potential damage could ruin the business should the rare event occur. Therefore, the first priority should be insuring against risks that threaten the company's existence . These could include devastating natural disasters or legal liability claims from injured parties. It's also essential to consider coverage in case the founder is incapacitated for an extended period, for example, due to illness or an accident. If the business has built up a financial reserve, it may be able to cover minor damages itself. However, only a good insurance policy can protect against truly significant risks.

First and foremost is business liability insurance . There's no way around it , because by law, the business is liable for damages it causes to customers, employees, or others. Thanks to the integrated legal protection function, the liability insurer defends against unjustified claims for damages . If the claims are justified, however, the insurance company covers the damages up to the sum insured. This sum represents the upper limit of compensation. It's not something to skimp on, because legal liability knows no bounds. Tip: Business liability insurance often includes private liability coverage for the owner and their family at no extra cost.

Building and contents insurance

Business liability insurance covers damages to others – just like car liability insurance . Comprehensive car insurance is to your own vehicle what building and contents insurance are to a workshop: it covers damage to your own property. Besides the vehicle fleet, tools, machinery, and warehouses usually represent significant assets. These are often partially financed by loans, and banks require collateral for them. Standard policies cover damages caused by fire, lightning, explosion, hail, storms (from wind force eight upwards), tap water, or burglary. For an additional premium, natural hazards such as snow pressure, earthquakes, and floods can be included. Insurance against cybercrime is becoming increasingly important, as attacks on small and medium-sized enterprises are on the rise. Coverage is also available against embezzlement by employees.

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The following applies to all insurance policies: Only what is explicitly stated in the terms and conditions is covered. If in doubt, a quick look at the fine print helps.

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checklist

Anyone taking over an existing business should make sure to notify the insurance company of the change of ownership. In addition, the following information is important:

Examination
✔️ Concluded insurance contracts
✔️ Are all documents available?
✔️ Were all contributions paid on time?
✔️ Were any discounts granted and if so, for what?

Tip: If the insurance contracts or terms and conditions are incomplete, ask the insurance company for a copy.

Scope of insurance
✔️ Are all important business risks insured?
✔️ Is there any under- or over-coverage anywhere?
✔️ Which risks are not covered?
✔️ List of all insurance claims made in the last five years

Tip: To avoid underinsurance, the sum insured (upper limit of compensation) should be calculated so that everything could be bought new on the day of the loss.

Documents
✔️ Insurance policies
✔️ Correspondence with the insurance companies
✔️ Proof of transfer
✔️ Overview of all risk prevention measures such as fire protection, alarm system, security personnel

Tip: Keep the documents in a secure place such as a safe or bank safe deposit box. This way you can prove your claims even after a fire.

Contact Person
✔️ predecessor
✔️ Responsible insurance intermediary (representative, broker)
✔️ German Insurance Protection Association
✔️ Association of Insured Entrepreneurs

Tip: Keep important addresses with your insurance documents in a safe place.

Conclusion

Fine print: A look at the terms and conditions prevents unpleasant surprises. If in doubt, consult an expert.

Insurance advisors work neutrally and for a fee. They make recommendations but do not sell policies.

Representatives only broker the policies of one company and receive a commission for closing the deal and providing ongoing support.

Brokers arrange policies from various providers on a commission basis.

Well disguised: Neutral-looking comparison platforms like Check24 are actually brokers and profit from commissions.

Needs assessment: The Federal Ministry for Economic Affairs and Energy provides a checklist for insurance at www.existenzgruender.de.

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