Last Updated: May 30, 2024, 2:00 pm by TRUiC Team

Prototype Design Business Insurance

Getting insurance for your prototype design business is essential.

Prototype design businesses need to be protected against things like claims of professional negligence, breaches of contracts, and intellectual property infringement.

For example, your business uses patented technology in the production of one of its designs, or  a client claims you failed to deliver the requested prototype designs on time.

We’ll help you find the most personalized and affordable coverage for your unique business.

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Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for a Prototype Design Business

General liability insurance is — generally speaking — one of the most important insurance policies for prototype design businesses. 

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

Some other useful policies that are worth checking out for your prototype design business include:

  • Professional liability insurance: Protects your business financially if it is sued for negligence or malpractice.
  • Commercial property insurance: Protects your business from bearing the costs of replacing its physical assets if they have been damaged by certain risks (e.g., fires, thefts, or natural disasters).
  • Workers’ compensation insurance: Your business is obligated by law to possess this policy if it hires any workers on a part-time or full-time basis.

Make sure to keep an eye out for the following two types of insurance providers when looking to obtain coverage for your prototype design business:

  • Traditional brick-and-mortar insurers — This term describes firms like Hiscox and Nationwide, which utilize physical spaces and insurance agents to sell their products.
  • Online insurers — This term describes firms like Next and Tivly, which utilize their website and AI in order to sell their products.

Typically, due to the lower overheads associated with running an online business, online insurers offer their products at greatly reduced prices.

For this reason, they tend to be the preferred option among businesses when it comes to reliable coverage.

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Cost of General Liability Insurance

On average, prototype design businesses in America spend between $450 - $750 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for a prototype design business to other professional industries using the graph below.

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Graph showing average price of general liability insurance prices per industry

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Find the Best Rate

Discover the best coverage at the lowest rate in our cheapest business insurance review.

Common Situations That General Liability Insurance May Cover for a Prototype Design Business

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Example 1: An overnight storm rips a hole in the roof of your office building, allowing water to leak in and destroy some property a client left in your care. General liability insurance would cover the cost of replacing the client’s damaged property.

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Example 2: A competitor files a lawsuit against your business, claiming you libeled her company. While you disagree with her claim, you know you need to hire an attorney immediately. General liability insurance would pay for your legal defense.

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Example 3: While walking into the restroom in your building, a client slips on wet tiling, breaks an arm, and decides to sue your company because you didn’t mark the wet floor. General liability insurance would cover your legal defense costs and any required settlement.

Other Types of Coverage Prototype Design Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:

Professional Liability Insurance

While you strive to satisfy your clients with your prototype designs, there’s always a chance someone might decide you made a mistake or failed to perform. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in the equipment, supplies, furnishings, hardware, software, and real estate needed to establish your company. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as the business materials stored there.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for your part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a workplace accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your prototype design business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Prototype Design Business Insurance FAQ

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Yes. Due to the high level of risk a prototype design business will likely face, opting not to obtain business insurance can be a very financially destructive move.

What’s more, it is particularly shortsighted in cases where your state’s law obligates your business to possess certain policies (e.g., workers’ compensation insurance).

Not necessarily. Certain exceptions may be written directly into your prototype design business insurance policy, and some perils may be entirely uninsurable.

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.