Starting a Business? Here's What Insurance You Need
Starting a new business is exciting — and overwhelming. Between registering the company, finding customers, setting up systems and managing cash flow, insurance can feel like something to deal with later. This is a mistake that has cost many startups dearly.
This guide cuts through the complexity to tell you what insurance you need from day one, what you can phase in later, and what to watch out for as your business grows.
Day One Insurance: The Non-Negotiables
Public Liability Insurance
If your business has any contact with the public — clients visiting your premises, you visiting client sites, selling products, or providing services in public spaces — public liability insurance is your number one priority.
A single public liability claim can easily exceed $100,000 and could destroy a startup before it has a chance to grow. The good news: public liability for a small new business is typically very affordable, starting from under $500 per year for a sole trader with low-risk activities.
Get quotes from day one. Many client contracts and commercial leases require evidence of public liability before you can start work.
Professional Indemnity Insurance (If You Provide Advice or Professional Services)
If your startup provides any form of professional advice, consultancy, design, IT services, or other knowledge-based services, professional indemnity insurance should be purchased before you take on your first client.
PI operates on a claims-made basis — you need to be insured when the claim is made, not just when the work was done. Starting PI from day one builds your claims history and provides the retroactive date that will be important as your business matures.
Many client contracts require evidence of PI before engaging you. Tech startups, in particular, should note that standard PI may not cover technology-specific risks — tech professional indemnity policies are available.
Cyber Liability Insurance (If You Handle Customer Data)
If your startup collects any customer data — names, email addresses, payment information — cyber insurance should be considered from day one. Under the Privacy Act 2020, even a startup is obligated to notify the Privacy Commissioner and affected individuals of a serious data breach.
Cyber insurance for a new small business can be very affordable (from $400–$800/year) and provides critical protection as you build your digital presence.
Month 1–3: Add These as Your Business Requires
Business Contents Insurance
Once you have business assets — computers, equipment, tools, inventory — insure them. A home contents policy will not cover business equipment used commercially. A basic business contents policy is inexpensive and ensures a single theft or incident doesn't derail your startup.
Employer's Liability Insurance (When You Hire Your First Employee)
The moment you hire even one employee, your liability exposure changes. Add employer's liability insurance to your programme before the first employee starts. This is typically packaged with statutory liability in NZ.
Statutory Liability Insurance
WorkSafe NZ, the Commerce Commission and other regulators can investigate and prosecute businesses of any size. Statutory liability insurance covers your legal defence costs and any fines — essential once you have employees or operate in a regulated industry.
When Your Business Grows: Phase In These Covers
Directors & Officers Liability
If you establish a company and bring in shareholders, investors or external directors, D&O insurance becomes important. Many investors require it as a condition of investment. Add it when you incorporate or when you raise external funding.
Business Interruption Insurance
Once your business has meaningful revenue that would be disrupted by a major incident, business interruption insurance is worth adding. For a solo startup working from a laptop with remote clients, the risk may be lower initially. For a business with physical premises or specialist equipment, add BI from when the premises are established.
Commercial Property Insurance
If you lease commercial premises, insure your contents and fit-out from the day you move in. If you purchase commercial property, insure it immediately.
Common Startup Insurance Mistakes
Waiting Until You Can Afford It The time when insurance is most critical — the early days when you have minimal cash reserves to absorb a claim — is precisely when many startups skip it. A modest insurance premium is almost always more affordable than a single uninsured claim.
Underinsuring to Save Money Getting the minimum cover to satisfy a client contract but not adequate cover for your actual risk. If your actual exposure exceeds your policy limit, you pay the difference.
Not Disclosing All Activities Insurance operates on the principle of utmost good faith. If your business activities are not accurately described to your insurer, a claim related to an undisclosed activity may be declined.
Assuming Household Insurance Covers Home-Based Business Activities It doesn't. Personal contents policies explicitly exclude business activities. If you work from home, your business equipment, clients visiting your home, and any business liability are not covered by your household policy.
Not Reviewing Cover Annually A startup in year one looks very different from a growing business in year three. Review your insurance at every renewal — add covers as your risks grow, increase limits as your revenue and assets grow.
Getting Insurance for Your New Business
Many startup founders find it easier to use an insurance broker who can:
- Assess your specific startup risks
- Bundle multiple covers cost-effectively
- Provide certificates of insurance needed for client contracts
- Review and update your programme as you grow
A specialist in commercial insurance for businesses across New Zealand, with expertise in helping SMEs and professional services firms navigate the commercial insurance market.