When should a startup get business insurance?

It's a smart move to get business insurance as soon as your startup starts operating. Even if you are just planning or developing your product, risks can pop up early. Think of it like buying car insurance before you drive your new car off the lot. You want protection from day one, not after something unexpected happens.

Can I get temporary or short term insurance for my startup?

Most comprehensive business insurance policies are set up for a twelve month period and renew annually. While some specific situations or events might allow for short term cover, it is less common for the broad protection a startup needs. It is best to discuss your specific needs with an insurer or broker.

What happens if my startup operates from home?

If your startup operates from home, your standard home and contents insurance probably will not cover your business activities or equipment. You will need a separate business insurance policy to protect your work related assets, any stock you hold or if clients visit your home.

Are there any legal requirements for startup business insurance in Australia?

The main legal requirement for business insurance in Australia is workers compensation, which is compulsory if your startup has employees. The specific rules for workers compensation can vary between states and territories. Other types of insurance like public liability might be required by specific contracts, leases or industry regulations, even if not mandated by general law.

How can I reduce the cost of my startup business insurance?

There are a few ways to potentially lower your startup business insurance costs. You can consider bundling multiple policies together with one insurer, which often comes with a discount. Increasing your excess can also reduce your premiums. Lastly, implementing strong risk management practices like good security or safety protocols shows insurers you are proactive about preventing incidents, which can sometimes lead to lower costs. Always compare quotes from different providers too.

What is typically not covered by startup business insurance?

Startup business insurance policies generally do not cover intentional damage or illegal acts. Pre-existing conditions, issues that were known before the policy started, are also usually excluded. Other common exclusions can include normal wear and tear on equipment, losses from poor business management decisions or certain types of natural disasters if not specifically added to your policy. Always read the PDS to understand the exact limitations of your cover.

Should I use an insurance broker or buy directly from an insurer?

Both options have their perks. Using an insurance broker means you get expert advice and they can compare policies from various insurers to find one that suits your startup's unique needs and budget. Buying directly from an insurer can be straightforward if you know exactly what cover you need, potentially saving you time. The best choice often depends on the complexity of your business and how much guidance you are looking for.

Startup Business Insurance

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Most startup business insurance premiums are tax-deductible as operating expenses, including public liability, professional indemnity and workers compensation cover.
Standard home and contents policies don't cover business activity, so home-based startups typically need a dedicated policy or a home-business extension.
Cyber insurance is strongly recommended for any startup handling customer data or running an online platform, as it covers breach response, recovery and legal costs.
Public liability isn't legally compulsory in Australia, but landlords and clients usually require it, while workers compensation and CTP remain the only mandatory cover.

What risks does your startup business face?

Every time a business opens its doors, it faces the possibility of disaster. And with limited funds to fall back on, even a minor setback could be a catastrophic event. Typical risks that you face in your startup include:

Fire or theft. Premises damaged or destroyed and stock lost or stolen could spell the end for your struggling startup.
Illness or injury. If your new business only has one or two principals, getting injured or sick could mean there’s no-one to keep things going while you recuperate.
Loss of income. If business grinds to a halt for any reason, not having an income could force you to close your doors in a matter of weeks e.g. being unable to pay back a business loan you have taken out.
Injury or property damage. If you, your employees, your products or your premises injure a third party or damage their property, you could be facing a lawsuit and liability costs you can’t afford to pay.

What types of cover are suitable for your startup businesses?

To get protection from specific risks, all businesses, including startups, need the following types of business insurance:

Public liability insurance. This is not negotiable. If you operate bricks-and-mortar premises visited by the public, you must have protection from litigation in case people injure themselves or you damage their property.
Product liability insurance. If you manufacture a product that consumers use, you must have protection from litigation in case they injure themselves or suffer a loss because of your product.
Cyber liability insurance. This protects you from online risks such as fraud or data breaches. This is a real concern for businesses who operate in the online space.
Property insurance. This includes protection for your business premises and its contents against loss or damage from fire, theft or natural disasters. This is often a requirement of any commercial leasing arrangement.
Worker compensation. If your startup has employees, it’s compulsory to take out worker compensation cover for them in case they suffer a work-related illness or injury.
Key person insurance. If your startup consists of one or two people, it’s vital to have protection against the loss of a key person in the business. This would give you the funds to find and employ a suitable replacement in their absence.

Insurance type	Discovery stage Self funded Little to no employees Still developing your product/service	Efficiency stage You have raised around $1million in cover You are hiring Your product /service has launched	Scale stage You have had a few rounds of funding You have an HR department Your clients and revenues are growing
Public liability insurance	Need cover	Need cover	Need cover
Product liability insurance	Need cover	Need cover	Need cover
Cyber liability insurance	Need cover	Need cover	Need cover
Workers compensation	Might need cover	Need cover	Need cover
Key person insurance	Won't need this cover	Need cover	Need cover

What if I have an online business?

As well as the above types of cover, a startup which is also an Internet business requires additional insurance to protect itself from a variety of online risks.

This is known as Cyber Insurance, a relatively new form of cover which addresses six main areas of risk:

Technology professional services. A startup providing online technical services such as web hosting or cloud services needs protection in case its provision (or lack of provision) of those services causes someone else to suffer a loss.
Multimedia liability. Startups need protection against unintentional copyright breaches, which occur frequently with online content.
Security and privacy liability. Startups storing and managing customer data need protection against potential data losses and breaches of privacy.
Customer support and reputational expenses. A startup that suffers a data loss incident needs funds to pay for damage control and public relations to help restore their reputation.
Data recovery and business interruption/loss of income. A startup which suffers a data breach or loss needs funds to pay for data recovery and for lost income while the business is not able to operate.
Cyber extortion. A startup that has its critical data held hostage through cyber extortion needs funds to pay the ransom and for forensic investigation costs.

Get a business insurance quote for your startup

Frequently asked questions

The main legal requirement for business insurance in Australia is workers compensation, which is compulsory if your startup has employees. The specific rules for workers compensation can vary between states and territories. Other types of insurance like public liability might be required by specific contracts, leases or industry regulations, even if not mandated by general law.
There are a few ways to potentially lower your startup business insurance costs. You can consider bundling multiple policies together with one insurer, which often comes with a discount. Increasing your excess can also reduce your premiums. Lastly, implementing strong risk management practices like good security or safety protocols shows insurers you are proactive about preventing incidents, which can sometimes lead to lower costs. Always compare quotes from different providers too.
Startup business insurance policies generally do not cover intentional damage or illegal acts. Pre-existing conditions, issues that were known before the policy started, are also usually excluded. Other common exclusions can include normal wear and tear on equipment, losses from poor business management decisions or certain types of natural disasters if not specifically added to your policy. Always read the PDS to understand the exact limitations of your cover.
Both options have their perks. Using an insurance broker means you get expert advice and they can compare policies from various insurers to find one that suits your startup's unique needs and budget. Buying directly from an insurer can be straightforward if you know exactly what cover you need, potentially saving you time. The best choice often depends on the complexity of your business and how much guidance you are looking for.

Sources

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Written by

Alex Reid

Expert

Alex Reid is Finder’s business insurance cadet. He has a Master of Marketing from the University of Technology Sydney, with a background in business and sales. When not writing about business insurance for Finder he's a keen scuba diver, recently completed his 200th hour underwater and his PADI Divemaster certification. Before working at Finder he lived in Hangzhou China, where he studied Mandarin and Chinese culture. See full bio

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Startup Business Insurance

Startup business insurance can help with everything from storm damage to cyber attacks. Get it straight from an insurer, or with help from a broker. Easy.

Key takeaways

What risks does your startup business face?