Starting your business this year? What budding entrepreneurs need to know about insurance

Starting your business this year? What budding entrepreneurs need to know about insurance

Despite a challenging economic landscape, entrepreneurship in South Africa continues to flourish. The country now boasts over 2 million micro, small and medium-sized enterprises, representing 98% of formal businesses, according to the United Nations Conference on Trade and Development (UNCTAD).

While starting a new business is an exciting milestone, it comes with a long list of responsibilities, including safeguarding your operations against potential risks. Considering that up to 80% of small businesses fail within the first five years, one big setback can result in closing your doors. So, whether you’re planning on operating from a rented premises, your home or entirely online, the right insurance solutions can mean the difference between success and failure when the unexpected occurs.

Here are five things to consider about insurance when starting your business in 2025:

1. Do you have the right cover for your premises?
When it comes to your physical location, securing adequate insurance for your business premises is essential. Commercial property insurance typically covers risks such as fire, theft and natural disasters. For businesses renting premises, ensure that you understand your lease agreement and remember that, while your landlord is responsible for insuring the property structure, you are responsible for insuring its contents.

2. Have you considered internal risks?
Businesses rely on people, and protecting your workforce and reputation is just as important as protecting physical assets. Depending on the nature of your operations, you may need:

• Fidelity cover: This cover provides protection against losses incurred due to theft or fraud by employees. This is particularly relevant for businesses handling significant cash flow.
• Professional liability insurance: If your business provides advice or professional services, this cover safeguards against claims of negligence or errors that could result in financial losses to clients.

3. What about cyber threats?
The rise of digital business operations has brought with it a surge in cybercrime, making cyber liability insurance a necessity for businesses of any size. This type of cover protects against data breaches, ransomware attacks and other cyber threats that could compromise sensitive business or client information.

In addition to securing cyber insurance, implementing strong, proactive cybersecurity measures is critical. Regularly updating software, using multi-factor authentication and educating employees about phishing scams can help a lot to reduce your exposure to cyber risks.

4. Are you prepared for the unexpected?
Business interruptions can impede operations and lead to significant financial losses. Business interruption insurance helps cover lost income and higher operating expenses during interrupted trade.

Many businesses will also have high-value assets such as machinery, so in addition to business interruption cover, it is vital to ensure these items have sufficient insurance to help you recover quickly in case of theft or damage.

5. How can you stay one step ahead?
Insurance is a key component of risk management, but it works best alongside proactive risk mitigation strategies. It’s important to conduct regular risk assessments to identify vulnerabilities and implement measures such as advanced security systems, employee training and robust data backup protocols.

Navigating the ins and outs of commercial insurance can be daunting, especially for first-time business owners. By working with a trusted insurance adviser, you can tailor a comprehensive insurance package that aligns with your business’s unique needs and risks. Advisers can also assist in clarifying policy terms, identifying exclusions and ensuring compliance with requirements, helping you avoid common pitfalls like underinsurance or coverage lapses.