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According to recent studies, nearly 50% of all new businesses fail within their first five years, while 65% fail within their first 10 years – amounting to roughly two-thirds of new startups not surviving a decade.
It’s impossible to determine a definitive leading cause for this. Whether it’s a cybersecurity breach, claims of negligence, poor financial management, or a simple lack of market demand, many startups will face a multitude of challenges that could contribute to their downfall. What is clear, however, is that business insurance could have been the saving grace for many of the businesses we’ve lost.
Business Insurance as the Saving Grace
Looking specifically at errors & omissions insurance coverage, this type of insurance can help protect startups from a range of common legal and financial pitfalls, including claims of negligence, mistakes, or failures to perform services as promised. Realistically, these are the main pitfalls that the majority of new businesses should be looking out for.
According to another study, in the first half of 2024 alone, there were a total of 133,019 complaints made against businesses, representing an increase of over 40% compared to the same period in 2023. In 2025, this number is set to rise even further, and while big businesses with years in the market can navigate claims with greater resources and experience, startups often lack the financial cushion to absorb the costs of legal battles or settlements.
Insurance could be the key here to cover these costs and prevent just a single lawsuit from derailing an entire business. As well as this, there’s also general liability and business interruption insurance to think about – insurance types that can provide essential financial protection during periods of uncertainty. Whichever policy startups choose, there’s no doubt business insurance can be the saving grace that keeps them afloat when seemingly inevitable challenges threaten to make them sink.
Is Business Insurance Overlooked?
The problem is that business insurance is still one of the most overlooked and underappreciated parts of business management. Looking at the UK for a moment, in 2022, it was reported that 44% of small and sole trader businesses didn’t have any insurance, either because the business was deemed ‘too small’ or didn’t have enough customers visiting the premises. Neither of these reasons should be enough to avoid business insurance.
On the contrary, being ‘too small’ is one of the reasons to invest in an appropriate policy, especially considering that small companies are more vulnerable to financial risks. This points to the fact that business insurance is still overlooked in 2025, and that will have to change if we want to swing the success rate back in the startup landscape’s favour. Over the last few years, the options for smaller businesses have grown and are tailored to suit the unique needs of each enterprise.
Across the board, many insurance providers now offer more affordable, customisable policies, making it easier for small businesses to get coverage without breaking the bank. These options allow business managers to protect their company from a range of risks – whether it’s liability, property damage, or property errors – and avoid being part of that 50% that fails within 5 years.
As the startup landscape continues to evolve, understanding the importance of business insurance will be one of the most important things to get right. There will be some who claim that insurance is an unnecessary expense – or something only large companies need – but the reality is that small businesses are more susceptible to risks, and anything that can be a support when the risks show themselves is priceless.
Conclusion
Attaining business insurance is no guarantee that a business will be successful, but it is a crucial cog in the machinery of a well-rounded business strategy, so it’s important that attitudes begin to change. No longer can something as important as insurance be overlooked. Instead, it should be one of the first things that a business manager thinks about, ensuring that their business is protected from the very start of the journey.
Website of Source: https://www.economist.com/
Source: Story.KISSPR.com
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