By William S. Hughes of Arbella Insurance Group
If you run a small business or start-up company, then owning your own workspace might be a luxury you can’t yet afford. Many other innovators are experiencing this challenge, which is why leasing a co-working space is becoming increasingly more common. In fact, the number of co-working spaces is predicted to grow by 41% every year and hit 3.8 million by 2020.
However, these environments can present numerous risks for your business. You may have a shoestring budget when you’re just starting out, but effectively managing risk is critical to the success of any business. And part of managing risk is getting some important information up front. What’s covered by your building owner/landlord? What’s covered by your business insurance policy? What new hazards are you exposing your business to?
When mishaps happen — and they do — don’t get caught empty handed when it comes to coverage. Here’s what you can do to help protect yourself and your vision of the future.
1. Don’t Assume Your Property Is Covered
More often than not, building insurance is covered by the building owner. However, that doesn’t mean you’re off the hook. There are countless other property considerations that need addressing, such as making sure you have coverage for your office furniture, computers, inventory, and any improvements you make to the facility.
Other major, but perhaps less obvious, factors to consider are interruptions to your operations and loss of business income. Many perils can bring your business to a complete halt, including loss of electricity, damage to your computer systems, loss of critical records, fires, and floods. Thoroughly examine the space and ask the building owner questions before you sign the lease. Is there an automatic sprinkler system? Is the building well maintained? Does it have automatic fire and intrusion alarms to alert authorities?
2. Understand Your Liability
Even though you don’t own the building, you may be responsible for accidents that occur in and around the premises. A customer might suffer an injury, someone you hire could damage someone else’s property, or your equipment could overheat and cause fire or smoke damage to the building. Make sure you understand the Hold Harmless and Indemnification language in your lease.
You’re also liable for injuries to your employees. Whether that means slips or falls, carpal tunnel injuries, or a vehicular accident while an employee is driving on company business, you still need a Workers Compensation policy to provide coverage in the event of accident or injury.
3. Protect Yourself From Cyber Liability Exposures
Your office space may offer free Wi-Fi as a selling point, but it’s important to understand the risks of using a shared network. Shared networks are notoriously unprotected and you may be putting all your information and your customers’ information at risk. Additionally, if your laptop is stolen, all your data is jeopardized. A data breach of your customers’ personal information could land you in a costly liability lawsuit.
There are several ways you can protect your data. For starters, make sure you don’t cut any corners when it comes to cybersecurity. Enforce password protection policies, ensure data encryption, and set up firewalls. You may want to speak with a local independent agent about Cyber Liability and Data Breach coverage. Data is one of your company’s biggest assets. Keep it safe.
4. Know Who Your Neighbors Are
In a co-working setup, you’re sharing space with many people you don’t know, and that could leave you more exposed to third-party claims. Before you commit to sharing space, learn about the other businesses. What is their senior leadership like? How long have they been in that space? What kinds of companies are these, and what type of operations are they conducting? What kind of customer traffic volume and hours of operation do they have?
It’s always important to have Employment Practices Liability and General Liability coverage for your business, but the need becomes amplified when you are in a co-working setup.
Understand Your Risks And Plan Accordingly
Entrepreneurs may be risk takers, but there are some risks you don’t want to take. For a very low cost, you can get insurance coverage that will put these issues to rest.
“Leasing a co-working space can expose your business to many new hazards,” said Andrew Altman, president of Rodman Insurance in Needham, MA. “I always want to make sure my clients are aware of the insurance ramifications of their workspace before a claim occurs.”
The use of co-working offices is expected to continue growing. If you decide that arrangement makes sense for you, it’s vital that you do your due diligence, and part of that is consulting with an independent agent who’s familiar with your business and the local market. Knowing your risks, thoroughly investigating the new space before signing a lease, and taking advantage of the expertise of an insurance professional are all proper steps toward protecting your business. That protection is an investment in yourself, your business, and your future.
Bill Hughes is assistant vice president for Commercial Lines at Arbella Insurance Group and oversees commercial underwriting and loss control. He has 30 years of experience in property and casualty insurance, risk assessment, and sales management. Bill holds a BS degree in management engineering from WPI.
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.