Business insurance for start-ups: what is compulsory and what is sensible

As an employee you hardly notice how much your employer covers: sick pay, a liability policy when you damage a client's property, often health cover and a pension. Once you start for yourself, that safety net is gone. Only a few types of business insurance are compulsory; the rest is your choice, and every premium competes with your other start-up costs. So do not start with a list of policies. Start with the risks that could end your business or empty your savings, and insure those first.

Which business insurance is compulsory?

Compulsory cover almost always follows from one of four things: you employ people, you drive vehicles for the business, you work in a regulated profession, or a contract demands it. That last one is not law, but a lease, a client contract or a tender that requires public liability cover of a set amount is just as binding in practice.

Checked on official sources in October 2026. Insurance law changes and many rules are set regionally; confirm with your regulator or professional body.

Check your country

• Staff: which employer insurance is compulsory from the first employee, including temporary or part-time staff?
• Vehicles: does your private car policy cover business use, or do you need a commercial policy?
• Profession: does your regulator or professional body prescribe professional indemnity cover and a minimum amount?
• Health and income: are health insurance or social insurance contributions compulsory for the self-employed?
• Contracts: which covers and limits do your lease, clients and tenders require?

Which insurance is sensible for a start-up?

As a rule, insure the losses you could not pay out of your own pocket; that is also the advice of the SBA (source: SBA, August 2026). These are the covers most start-ups weigh up:

How to weigh it: probability times impact

For each risk, estimate how likely it is in a year and what it would cost. Probability times impact gives an expected cost, but the impact decides: a rare event that would wipe out the business belongs with an insurer, a frequent small loss you carry yourself. Sofia, who is opening a lunch café, made this table:

The fire and the illness have the same expected cost, €900 a year, yet either could close the café. The theft is ten times more likely than the fire, but a loss of €1,500 she can absorb. A higher excess on small claims lowers the premium, and the saving helps pay for cover of the big risks.

Fictitious Firmfocus example. Probabilities and amounts are illustrative; the logic works in any currency.

Before you sign a policy

• Exclusions: read what is not covered, such as work abroad, subcontractors or specific activities.
• Sum insured and excess: match the sum insured to the replacement value and choose an excess you can carry.
• Timing of claims: check whether the policy covers claims made during the policy period or incidents that happened in it. For advice work, a claim can arrive years after the job.
• Several quotes: the SBA advises working with a licensed agent and comparing quotes from several (source: SBA, August 2026).
• Annual review: new staff, a van, a second location or online sales change your risks, so review the cover every year.

Small start vs larger start

Pitfalls

• Relying on private policies: home and private liability insurance usually exclude business activities and equipment.
• Underinsurance: a sum insured below the replacement value means a claim is paid only in part.
• Missing contract limits: a client or landlord may require a specific cover amount; check before you sign.
• Insurance after the start: founders who add policies later often find their prices leave no room for the premiums.

With the risks covered, the last of the eight steps is funding and grants. Hiring soon? See your first employee. All other topics are in Start a business.