Insurance 101 for Startups: What You Need to Know

Why Insurance Matters for Lab Incubators

Operating in a lab incubator involves unique risks that standard business environments might not encounter. Lab spaces often house expensive equipment, sensitive experiments, and hazardous materials, making liability insurance essential for protecting the tenant and the incubator.

Over the last 12 years, Lab Launch has helped over 50 client companies meet insurance requirements in a safe and professional environment while complying with lease obligations and risk management policies. 

Key Insurance Requirements for Lab Launch

As a lab incubator in California, Lab Launch has specific insurance requirements for companies using its facilities. Generally, this is what you can expect to see across the industry, however, it can vary depending on the nature of your company. 

Here’s a breakdown of what you’ll need:

1. General Liability Insurance

   • Minimum Coverage: $1 million per occurrence, $2 million aggregate limit.

   • Purpose: This covers claims related to bodily injury, property damage, or personal injury caused by your company’s operations within the lab.

   • Additional Insured Clause: Companies must list "LL2, Inc." (Lab Launch’s legal entity) as an additional insured. This ensures Lab Launch is protected in case of claims involving your business.

2. Commercial Property Insurance (Optional but Recommended)

   • Coverage: Protects your lab's property, including equipment, supplies, and data, from events like fire, theft, or water damage.

   • Tip: Evaluate whether you need additional coverage for equipment that is leased or provided by Lab Launch.

3. Worker’s Compensation Insurance

   • Requirement: If you have employees, California law mandates worker’s compensation coverage.

   • Purpose: This covers medical expenses, lost wages, and disability benefits for employees injured while working.

How to Obtain Insurance

For startups unfamiliar with securing insurance, the process can seem daunting. Here are some steps to simplify it:

1. Choose the Right Provider: Look for insurance companies that specialize in biotech or startups. They’ll better understand the risks involved in lab operations.

   1. MedMarc 

   2. The Hartford

2. Work With a Broker: Brokers can help you compare policies and ensure you meet Lab Launch’s specific requirements. Feel free to reach out to us at team@lablaunch.org if you’re looking for a referral.

3. Bundle Policies: Many insurers offer discounts if you bundle general liability, property, and other coverage.

Common Challenges and Solutions

1. Challenge: High Costs for Early-Stage Companies

   1. Solution: Explore industry-specific policies or group plans for startups. Some incubators, including Lab Launch, may partner with insurance providers to offer discounted rates.

2. Challenge: Understanding Technical Requirements

   1. Solution: Ask Lab Launch for a template or checklist to share with your insurer, ensuring your policy complies with the incubator’s standards.

3. Challenge: International Policies

   1. Solution: Some insurance policies will allow you to add international coverage. However, this add-on will often come at an exorbitant cost. In our experience, companies that have faced this issue instead re-incorporated in the target country and purchased new insurance from the ground up in the new country. 

Pro Tips for Lab Launch Start-ups

• Update Your Coverage as You Grow: Your insurance needs will evolve as your operations scale. For instance, expanding your team or offering new products may require updated policies.

• Keep Certificates on File: Lab Launch will likely request a Certificate of Insurance (COI) as proof of coverage before you can move in. Ensure it’s up to date annually.

• Review Lease Agreements: Check if the lease agreement includes additional insurance clauses, such as indemnification requirements or specific exclusions.

Conclusion

Having the right insurance isn’t just a legal or contractual box to check; it’s an essential investment in the longevity and success of your startup. By understanding the requirements and securing the appropriate coverage, you can operate confidently within Lab Launch and focus on innovating without unexpected financial setbacks.