Risk protection for start-ups: what insurance cover do you need?

Canton Zurich: a pioneer of innovation

According to the Swiss Federal Statistical Office, Zurich was the canton with the highest number of new company registrations in 2017 (7226), followed by Vaud (4343) and Bern (3621). But did you know that not every new company automatically qualifies as a start-up? The term start-up applies to companies that are no more than ten years old, pursue an innovative business model and target strong growth.

High rate of bankruptcies

If you want to look to the future with confidence as a business founder, you should have a good grasp of your finances, otherwise your dream can quickly turn sour. According to an analysis by Bisnode D&B, 4709 companies in Switzerland shut down in 2017. That number is significantly higher among new companies according to the Swiss Federal Statistical Office: only 80 percent survive the first year, after five years only one in two remain in business. The reasons can be a lack of product competitiveness, high expenditure, low reserves or low revenue awareness – but inadequate risk protection is also an issue.

Risk protection is existentially important

Company founders have a lot to think about: acquiring customers, generating turnover and growing. Insurance and future provisions are often placed on the backburner. And yet one accident or case of illness can mean the end of a new company. In addition, some types of cover are mandatory, so it’s illegal not to have them. Good risk protection is therefore essential for company founders. But what risks should company founders secure themselves against in order to achieve their dream of owning their own company in self-determination and look to their financial future with confidence?

Which insurance cover is particularly suitable for business founders?

The following are highly recommended:

• Professional and public liability insurance
• Legal protection insurance
• Disability income insurance
• Depending on marital status: term life insurance 
• If you have an office or warehouse: cover for inventory and goods
• Loss of earnings insurance
  

Which insurance policies are mandatory for business founders?

First pillar: mandatory
The first pillar (AHV) is mandatory for self-employed persons, owners of a public limited company (AG) or limited liability company (GmbH) and employees. Unemployment insurance (ALV) is mandatory for all, except the self-employed. They do not have access to that insurance.

Second pillar: mandatory in most cases
Second pillar protection depends largely on the type of company:

Self-employed (sole proprietorships):

• Pension fund (BVG): voluntary
• Accident insurance (UVG): voluntary
• Short-term disability benefit (CEC): voluntary

Owner of a public limited company (AG) or limited liability company (GmbH) and the employees: 

• Pension fund: mandatory if the annual salary exceeds CHF 21 330.
• Accident insurance: mandatory as soon as the salary has been paid.
• Short-term disability benefit (CEC): voluntary

With occupational provisions (BVG), founders also have three pension models to choose from:

Full insurance
With full insurance, which is only offered by a few insurance companies (e.g. Swiss Life), the focus is on security. Companies benefit from a 100% capital and interest rate guarantee on all vested pension capital.

Semi-autonomous solution or autonomous solution
A semi-autonomous or autonomous employee benefits solution offers the chance of higher returns over the long term. However, as the retirement savings develop in line with the capital market, the risks are also higher.

If you take out the recommended and mandatory insurance cover, there's nothing in the way of your dream of owning your own company and having a self-determined financial future.

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