You're Starting Up a Hedge Fund,
What Insurance Coverages Do You Really Need?
Before you open the doors to your new venture, thereâ€™s a couple of basic insurance coverages youâ€™ll need to get started, which weâ€™ll itemize below:
- Youâ€™ll need a business owners policy, or office package. Sometimes these policies are called BOP policies (short for business owners policy) and they combine property and liability coverages with a bunch of needed basic coverages. Regardless of having your own office space, or if youâ€™re in a co-working location, having this basic policy is important because of the general liability component which will protect you from claims arising from bodily injury or property damage. The basic limit of liability coverage for most policies is $1,000,000 per occurrence, but itâ€™s often pretty cheap to increase that to $2,000,000 for a nominal increase.
- In addition to liability protection, the BOP policy will protect your hedge fund for loss of business personal property (office contents) like computers, office supplies, furniture, fixtures, etc. These should all be insured at their replacement cost.
- The cost of a business owners or BOP policy for a new fund will run around $1,000 to $3,000 per year.
- If you have employees, and depending on your entity formation (Inc., LLC, LP) you will likely also need workers compensation. Workers comp as itâ€™s also known is a â€śstatutoryâ€ť coverage required by law when you have employees. Many new funds do deploy a PEO (Professional Employer Organization) to handle most all aspects of HR including workers comp and employee benefits, so if this is how youâ€™re doing it, then no separate policy is required. (the same is true of Statutory DBL/Disability insurance in NY. If youâ€™re in a PEO, theyâ€™ll handle this for you.)
- The third coverage part we recommend on day one for a new hedge fund is Cyber Insurance. The risks associated with cyber are very significant, and coverage is relatively inexpensive. A good cyber policy with limits of $1,000,000 may be as little as $2,000 per year so we see this as almost mandatory.
Thatâ€™s it! All in youâ€™re looking at somewhere between $3,000 to $5,000 for the year. Now, as you aggregate AUM you and possibly your investors are going to want the firm to also have D&O and E&O insurance. You can read more about those coverage forms here.
Want to start the process with us? You can click the button below which will take you to our initial intake form which you can complete and our system will automatically forward it to us. Weâ€™ll follow up with you with some ideas of coverages and premiums. If youâ€™d like to talk to us instead of filling out the form, thatâ€™s great too! Contact me, Gordon B. Coyle at 845-474-2924 / firstname.lastname@example.org