What insurance do you need as a startup?

From public liability insurance to cyber insurance, getting the right cover from the start is critical for startups

It’s clear that as a startup you will need insurance of some kind, but knowing exactly what insurance you need can be confusing at the start.

Studies show that 44 per cent of UK SMEs have no commercial insurance. This is risky given how easy it is to be covered for a range of scenarios through business insurance.

Here we’ve outlined the main areas to ensure you’re covered for the year of business ahead.

Cyber insurance

The UK’s National Cyber Security Centre (NCSC) stated in its 2023 report that a suspicious email or website was reported every five seconds in 2022. According to Aviva, one in five UK businesses were targeted by cyber crime last year, 67 per cent were more likely to be a victim of it than a physical theft and the average claim for a cyber attack was £21,000.

Cyber insurance is therefore important to help protect your business from hacking attacks on work systems. Cyber attacks can include malware attacks, ransomware and the hacking of important data. Due to the heavy costs associated with the loss or corruption of company files, first-party (the business) cyber insurance will cover the cost of recovering data, restoring computer systems, extortion payment, notification costs, reputation management and the investigating of the crime.

Who is it for? All businesses

Public liability insurance

Public liability insurance is to cover claims from third parties such as the public or visitors against the business, usually resulting from personal accidents or damage to property.

Public liability insurance covers the cost of legal fees, compensation and repairs. Because it protects from third parties, the insurance applies to almost every business. It is typical for a business to be insured for up to £5 million.

Who is it for? All businesses

Directors and Officers insurance (D&O)

Directors and Officers insurance (D&O) is for executives and board members to protect their personal assets from a lawsuit from a company stakeholder and third parties. A company should have D&O insurance in place if they are to attract top managerial talent to the firm.

The insurance covers legal costs, damages and settlements as a result of managerial wrongdoing. The insurance does not cover any deliberate criminal actions.

Common scenarios for where D&O comes in include creditor claims when a company cannot pay its creditors, company mismanagement and the inaccurate reporting of company financials.

Who is it for? All businesses with directors or key managers

Healthcare insurance

Healthcare insurance for small businesses allows your company to cover the costs of private healthcare for employees, such as GP, hospital and healthcare expert costs so they can keep well and productive.

The insurance typically includes mental health support, musculoskeletal treatment and cancer cover.

Who is it for? All businesses, but usually cover is different for businesses with up to 249 employees

Delay insurance for startups

This one is specific to startups in the engineering and construction industry, as it covers the costs associated with a project being delayed.

Delay insurance – also known as DSU or Advanced Loss of Profits – covers the period of lost income in between the date the project was meant to start and the date it eventually commenced. Delays can cause lost income in loss of revenue and interest charges from loans.

It is worth noting that the insurance is for physical damage circumstances only. For example, a flood which has damaged infrastructure, resulting in a delay.

Who is it for? Construction, engineering and project reliant startups

What is delay insurance for start-ups?Delay insurance can be critical for start-ups in the construction and engineering industries, which rely on projects being completed on time

Employers’ liability insurance

In addition to the above, there is insurance you should already have as a startup, including employers’ liability insurance. This is a legal requirement for businesses with more than one employee as it protects them from an injury or illness they encounter as a direct consequence of the work they do for you. The insurance should cover your business for at least £5 million.

You must display this insurance certificate as inspectors will check and can fine a business £1,000 if it is not clearly displayed in the workplace.

Who is it for? All businesses

More on insurance for startups

Best insurance cover for startupsStartups need insurance cover, even when they’re still small. We’ll delve into why your startup needs insurance and which providers offer cover

Dom Walbanke

Dom Walbanke

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...

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