As they carve out the path to success, start-ups often face situations that require them to take a leap of faith. While such circumstances present exciting opportunities for many new businesses, these situations can also expose them to unexpected risks.
It’s a fact that mistakes and accidents happen in a business – more likely so to fledgling entrepreneurs who are still learning the ropes and constantly trying out new things. But as many new businesses experience growing pains, having the right insurance is essential to keep them protected.
Business insurance provides start-ups financial protection from unfortunate scenarios that could have otherwise cost them thousands, if not millions of dollars, making it difficult for the business to recover. Here are some of the risks Australian start-ups are likely to face that this type of policy covers.
Read more: Gallagher Australia: "Business insurances remain critical"
Because each start-up faces unique risks and challenges, there is no one-size-fits all insurance policy that caters to their every need. The type of coverage a start-up will require depends on several factors, including its business activities and scale.
Business insurance providers across Australia offers a range of policies that can help protect fledgling enterprises from the different risks they face. The selection is diverse, but according to industry experts Sydney-based comparison website Finder and Melbourne-headquartered insurance marketplace Smart Business Insurance, these are some of the essential coverages start-ups need to protect their businesses from a variety of risks.
|
Policy |
What it covers |
|---|---|
|
Public liability insurance |
Protects start-ups against claims resulting from accidents or injuries to someone else or property damage to another person’s belongings that happen because of their business activities |
|
Product liability insurance |
Protects businesses against claims of bodily injury or property damage resulting from the use of their product |
|
Professional indemnity insurance |
Protects businesses against claims arising from negligent acts or omissions committed while providing professional services and advice. Cover typically includes compensation, legal fees, and investigation costs. |
|
Cyber liability insurance |
Protects a start-up from the legal costs and expenses related to a cybercrime. Coverage can include fines, penalties, and notification costs in the event of a data breach. May also cover loss of profits resulting from business interruption caused by a cyber event. |
|
Commercial property insurance |
Protects the business’ premises and its contents against loss or damage from fire, theft, and natural disasters. Often a requirement for commercial leasing arrangements. |
|
Commercial vehicle insurance |
Covers the cost of repairing or replacing a start-up’s work vehicle if it is accidentally damaged or stolen. May also cover the cost of damage to other people’s property caused by the vehicle. |
|
Workers’ compensation insurance |
Covers the wages and most medical bills of a start-up’s employees should they suffer a work-related injury. Compulsory for most employers in Australia. |
|
Management liability insurance |
Protects a business’ directors and executive management against claims of mismanagement while performing their duties |
|
Key person insurance |
Designed for start-ups with one or two principals. Protects against the loss of a key person in the business. Covers the cost to hire a suitable replacement in their absence. |
According to Smart Business Insurance, a business policy with public liability cover can set back a sole trader start-up at least $50 in monthly premiums, including all fees. A tech start-up taking out a policy with public liability and cyber cover, meanwhile, will need to pay premiums starting at $120 per month. The bottom line is the amount of premiums each start-up will need to pay will depend on several factors, including the type of coverage needed, the cover limits, excesses, the industry the business is in, location, and number of employees.
