Nine types of insurance every Australian start-up should consider

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.

What risks are Australian start-ups facing?

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.

Theft: Stock lost or stolen can have a huge impact on the operations of a new business
Electronic breakdown: Malfunctioning computers and essential machinery could spell doom to a fledgling business
Fire: Financial losses due to fire damage to a commercial property and equipment could be difficult to recover from for many starting businesses
Illness or injury to key personnel: If the start-up has only one or two principals, getting sick or hurt could mean there will be no one to look after the business while the key people are recuperating
Loss of income: Any disruption to normal business operations could result in monetary losses that could force new businesses to close down
Third-party injury or property damage: These could lead to lawsuits that could cost the business thousands to hundreds of thousands of dollars, even if the suit is dismissed
Cyberattacks: The digital shift occurring across almost all industries has also pushed the number of cybercrimes to an all-time high – a single cyber incident could be fatal for a starting business

Read more: Gallagher Australia: “Business insurances remain critical”

What kind of coverage do Australian start-ups need?

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.

How much does business insurance cost for a start-up?

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.