Cushions and policies

Founders are primarily distinguished by a good business idea—less often by ample financial resources. This is precisely why insurance policies are essential.

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

Smart tradespeople plan ahead – right from the start . Of course, founders have their hands full setting up their businesses. But security can't be postponed ; otherwise, it'll be over faster than it began.

Founders are primarily characterized by a good business idea – less often by substantial 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 rule of thumb is: insure as little as possible, but as much as necessary.

Which risks should be insured

And what is needed? Herein lies a misconception, because it's less about the probability of potential damage than many believe. What's crucial is whether a risk has the potential to ruin the business – should the rare event occur. Therefore, the first step should be to insure against risks that threaten the business's existence. These could include devastating natural disasters or legal liability claims from injured parties. And let's not forget: provisions for the event that the founder is themselves incapacitated for an extended period, for example, due to illness or an accident.

The more reserves a business builds up over time, the better equipped it is to cover minor damages . However, only good insurance can protect against truly significant risks . First and foremost is business liability insurance. There's no way around it, as the business is legally liable for damages it causes to customers, employees, or others. Thanks to the integrated legal protection feature, the liability insurer defends against unjustified claims for damages. Legitimate claims are covered by the insurance up to the sum insured. This sum insured represents the maximum compensation. It's not advisable to skimp on this, as legal liability knows no limit. Tip: Business liability insurance often includes private liability coverage for the owner and their family at no extra cost.

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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, the largest assets are often found in the tools and workshop itself. Young businesses usually have a portion financed by loans. Banks require collateral for these loans. 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. Coverage is also available against cybercrime and embezzlement by employees . However, caution is advised: insurers' handling of pandemic risks has shown that only what is explicitly stated in the policy terms and conditions is truly covered. When in doubt, a look at the fine print is advisable.

Checklists

Trust is good – control is better

When it comes to insurance, anyone taking over an existing business should be absolutely sure that the insurance company must be notified of the change of ownership. The buyer should also obtain the following information:

✓ Concluded insurance contracts

• Are all the relevant 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
• What risk provisions does the company have? 
• Tip: To avoid underinsurance, the insured sum (upper limit of compensation) should be calculated so that everything could be purchased new on the day of the loss.

✓ Documents

• Insurance policies
• Correspondence with the insurance companies
• Proof of transfer
• Overview of risk prevention measures, such as fire protection, alarm systems, security personnel
• Tip: Keep the documents in a secure place, such as a safe or bank deposit box. This way, you can prove claims even after a fire.

✓ Contact person

• predecessor
• responsible insurance intermediary (representative, broker)
• German Insurance Protection Association
• Association of Insured Entrepreneurs
• Tip: Important addresses should be kept in a safe place with your insurance documents.

Here are more checklists from the BMWi!

Source: BMWi Business Succession, existenzgruender.de, Association of Insured Entrepreneurs

CONCLUSIONSmall print: A thorough review of the terms and conditions will prevent any unpleasant surprises in the event of a claim. If in doubt, consult an expert.
Insurance advisor They work neutrally and for a fee. They recommend, but do not broker, policies.
Real Estate Agent broker policies from various providers on a commission basis.
representative only sell the policies of one company and receive commission for the conclusion and support.
Well camouflaged: Neutral comparison platforms such as Check24 are registered as brokers and benefit from commissions.
Needs check: On existenzgruender.de The Federal Ministry for Economic Affairs and Energy provides a checklist for insurance companies.