As a startup company, getting your business off the ground comes with its fair share of challenges. There are many aspects to consider when trying to establish a successful business model – from the type of equipment you’re willing to invest in, to the number of people you’re able to hire.
It can be difficult at times to choose between the ‘must-haves’ and the ‘nice-to-haves’. However, one thing that should always be at the top of your priority list is business insurance.
Business insurance for start-ups may be pretty expensive and sometimes seen as a luxury item. However, when considering the longevity of your company’s future, there will be many bumps in the road that you will have to plan for. In any business industry, there will be risks, and as a small business, these risks could severely hit your financial income.
In this article, we’ll be learning more about business insurance costs and how to benefit from business insurance policies as a start-up.
Types of Business Insurance Costs for Startups
Although business insurance is a worthwhile investment for small businesses, it’s not ideal to splurge on unnecessary premium covers. This is where you have to decide what your company needs are and what you can afford to invest in.
Taking out an insurance premium is no easy task, and it’s something that you shouldn’t rush into – even though it will be a complicated and tiresome event. Take your time, shop around, and compare different quotes and premium offerings.
Here are some of the essential business insurance premiums that small businesses need to have:
Business Interruption Insurance
The number of business risks that could occur isn’t always internal. The external dangers to a company, like the unexpected Covid-19 pandemic, could significantly impact business operations. Once a startup experiences this kind of loss, it’s hard to find the financial capital to continue running your business.
This premium covers all the expenses you incur while your business is unable to operate for whatever unforeseeable reason. These expenses could be rent, employee salaries, overheads, and stock loss.
Commercial Vehicle Insurance
As a start-up, you’re likely to be using your personal vehicle for business use to save on operational costs. This premium allows you to cover those personal vehicles if you get into an accident, experience theft, or have some form of vehicle damage while on a business run.
Most car insurance premiums don’t fully cover the costs to repair your vehicle if you did not declare that you’re using your vehicle for business reasons. Having a commercial vehicle insurance premium helps alleviate these possible scenarios.
Cyber-risks or Data Breach Insurance
The digital age has led to most companies digitising confidential company and client information. Although more efficient, this digitisation needs to be protected in case of data theft due to hackings.
This insurance premium is crucial for all small companies. The financial lawsuits that could ensue, because of this data breach, could place your company in great financial jeopardy. It can also ruin your credibility in your respective industry as well.
Fidelity Insurance
As an employer, you always trust that you’re hiring the right people for the job. However, you do need to take precautions if there is a case of staff dishonesty within your company.
Theft or fraud by a staff member could be detrimental to a growing business, and this premium covers you for any kind of financial loss that you incur due to staff dishonesty.
General Liability Insurance
There are plenty of mishaps that could happen in a day, from your client tripping on an unmarked wet floor to property damage caused by a faulty product. You need to prepare for these instances as a start-up because they are pretty costly.
This premium covers you for these general risks that could occur on a daily basis during your operations.
Professional Liability Insurance
As a start-up, you have to prepare for any lawsuits that could ensue because of a faulty product or company negligence. These lawsuits are lengthy and could be dire for your financial well-being.
This premium is sometimes also called omissions and errors. It covers you in those events where you’re liable for the human errors that occur during your daily operations.
Workers Compensation Insurance
Employees are your greatest assets, and as such, they should be cared for in the workplace. There are many safety hazards that employees could come across in the workplace, and as a business owner, you are liable for any costs that come with those potential hazards.
This premium covers you if an employee suffers a workplace injury or disability. It gives you and your employee ease of mind knowing that the medical costs and monthly salary will be covered for however long the employee cannot work.
How to Calculate Startup Business Insurance Costs
Before you’re able to clearly define how much your startup business insurance costs will be, insurance brokers first have to conduct a risk assessment for your business profile.
Here are a few factors that insurance brokers should consider when conducting your business risk assessment:
1. Assess The Type Of Industry You’re In
The type of industry you’re in greatly determines how costly your insurance premiums will be. The higher the risk of theft, lawsuits, or property damage in your industry, the higher your insurance premiums will be.
2. Define Your Office Location
Insurance brokers need to assess how often you’re likely to claim before they offer you a premium, and office location is a significant component of that risk assessment.
Of course, if your start-up company is entirely remote or a home-based business, this will significantly decrease the number of potential thefts, lawsuits, and business interruptions you’re likely to have.
The less of a risk your company becomes, the less your insurance broker will charge you.
3. Evaluate the Size Of Your Business
Start-ups are considered relatively small companies, but the small details of your business determine how costly your insurance premiums will be.
For instance, the size of your office space. How much equipment you have and how expensive it is. There’s also the number of employees who work for you, the number of products you manufacture or sell, and your annual revenue.
How to Reduce Startup Business Insurance Costs
1. Opt for Comprehensive Packages Instead of Individual Premiums
The big aspect of doing your due diligence when searching for an insurance premium is that you’ll find that some insurance brokers offer business insurance packages. These packages usually contain two or three of the essential business premium offerings.
Opting for these business packages instead of individual premiums saves you plenty of annual costs that you could allocate to other parts of your company until you’re in a better position to re-evaluate your offerings.
2. Get Industry-Specific Premium Cover
Another effective way to reduce your business insurance costs is to choose an insurance premium tailor-made for your respective industry. These premium offerings cover specific business insurance risks for your particular industry, which allows you to spend only on what you need.
A few examples of industry-specific premium covers include :
- Handyman insurance – made for plumbers, mechanics, electricians, etc.
- Retail insurance – made for retail stores, restaurants, hairdressers and beauty shops, etc.
- Transport insurance – made for taxis, buses, couriers, trucks, etc.
3. Annually Review Your Premium Offering
As a start-up, it’s vital to review your premiums annually so that you’re better able to assess how your business risk profile is growing or depreciating. The more actions you take to reduce risk factors in your company, the higher your chance to qualify for a premium review. These could be small things such as regular service check-ups on your vehicles or maintenance on your office equipment.
This is where you can negotiate a new premium rate with your insurance broker because you’ve proven that you’re able to keep your risk profile at a minimum.
Business Insurance Companies for StartUps
The insurance industry is a saturated market, allowing you to have a reasonable competitive price range. As a startup, it’s essential to take advantage of this competitive industry to get the best bang for your buck.
Here are 5 of the best-suited business insurance premium costs for start-ups:
Final Review of Startup Business Insurance Costs
There’s no denying that taking out an insurance premium is a lengthy and costly process, especially for a start-up company. There are many things to consider and risks to evaluate, which may eat away at the time you could spend managing your daily operations.
However, the financial security that business insurance covers is immeasurable because of how often unpredictable events could happen during daily operations. As a start-up, there needs to be a thorough look at all the costs you can afford to handle and those simply above your pay grade.
This is what business insurance is for, to help alleviate those costs that could potentially bankrupt your growing company. There are many ways to cut corners when trying to save on budget costs. Just make sure your business insurance premium isn’t one of them!
Jump to:
One response to “Business Insurance Costs for Startup Companies in South Africa”
[…] factors play a huge role in minimising the overall cost of insurance for small […]