Should Start-ups Have Insurance Cover? Many insurers today offer protection against a host of business risks - be it law suits, cyber-attacks, theft or social media mishaps

Starting a business includes a lot of risks — some predicted and some unforeseen that may even force you to shelve your business plan.

And this after all the sacrifices you have made to transform an idea into a business model, from putting in all your savings to giving up on luxurious habits. It actually takes a lot more than said or expected.

The journey of an entrepreneur is no less than a roller coaster ride as he/she goes through setbacks and surprises.

Many of the challenges can be controlled, but more often than not entrepreneurs lose complete control over the wheels of their ships.

But, all of them take certain calculated, precautionary measures before starting out that often save them from getting derailed.

India is booming with start-ups but more than 90 per cent of them fail because of the lack of innovation, reveals a new study by IBM. How can business insurance help an entrepreneur recover from the failure.

Does a Start-up Need Insurance?

Many insurers today offer protection against a host of business risks. Be it law suits, cyber-attacks, theft to social media mishaps. So if the worst does happen, you know there'll be somebody to handle the bill and help you get back on your feet.

Entrepreneur India speaks to various start-ups, investors and insurance tech companies to present an overview on should start-ups have insurance cover in India.

Founder of MyOperator Ankit Jain doesn't agree to the fact that startups can benefit from business insurance. He said, "Start-ups are generally high-risk potential areas. Insurances generally work on low-risk and bigger impact businesses. It doesn't make any sense for either a start-up investing in something like business insurance or insurance firms providing any sort of cover to them."

Cloud telephony start-up, MyOperator is a bootstrapped organization. Jain's suggestion to mitigate risk is, "Good cash flow management is what start-ups should focus on at initial stages."

Can't a High-risk Venture Have Insurance Cover?

Doctor-turned-entrepreneur Dr. Murali Bhardwaj, CEO of Hyderabad-based Click2Clinic, points out that whether a start-up is bootstrapped or investor-funded, it does need business insurance to mitigate risks. "It's ultimately the venture fund, which suffers the most. At times, companies go debt-ridden and become a financial burden on an entrepreneur. Start-ups are high-risk projects. Business insurance can actually provide a layer of protection to enterprises," he says.

Insurance companies can actually make start-ups more enterprising and mobile, stresses Bhardwaj, adding, "Once you're insured, you're free from your mind to take better decisions for your company as the fear factor will be handled by another company."

Investor's Say

Kolkata-based investor Pankaj Maloo has a different take on the matter. He says, "Insurance is something which helps you keep some money aside. The fund always helps entrepreneur in different ways in business."

Conclusion

While large organizations have risk-management experts to identify and develop strategies to mitigate various risks, start-up owners have the responsibility of risk management.

And as the financial consequences of disruptions are very grim when it comes to SMEs and start-ups, business insurance can act a great tool to provide protection against catastrophic losses such as natural disasters, professional malpractice, theft, vandalism, false advertising and many other business risks. Besides, tax deductions can be applied on the premiums paid towards business insurance.