What insurance do hardware startups need in Australia?

Most hardware founders arrive at insurance because someone asked for it. A distributor wants a certificate before they will stock the product. An enterprise customer sends a procurement questionnaire. An investor's checklist lands.

By that point it feels like an administrative task. It is not. Hardware carries a problem shaped by its installed base: one design decision repeats inside every unit you ship, and those units are in other people's hands.

A firmware update can change how a product behaves. It cannot recover a unit with a physical fault, undo a compliance gap, or repair something already damaged. That is why a hardware policy has to answer more kinds of claims than a software one, all from a single product.

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Which parts of insurance you need depends on what you make and who uses it. Match yourself against this list.

• Selling or supplying a physical product → products liability
• Designing or engineering for clients → professional indemnity
• A product that underperforms and costs a customer money without breaking anything → manufacturing errors and omissions, or financial injury cover, where available
• Firmware or software inside the device → technology professional indemnity
• A connected IoT device collecting data → cyber, sometimes described as IoT device insurance
• Importing components or finished units → marine cargo, plus products liability
• Holding stock, tools or test equipment → property, tools of trade and plant cover
• Employing staff → workers compensation, which is compulsory. Each state and territory runs its own scheme, worker definitions differ, and some contractors may be treated as deemed workers
• Outside investors or independent directors → directors and officers, or management liability

Most hardware startups tick five or six of those lines. This list runs longer than a software company's for one reason. A single product can generate several different kinds of claim at once, and the covers that answer them were designed separately.

upcover arranges hardware insurance and robotics insurance in Australia for technology and manufacturing businesses, as a Corporate Authorised Representative of an AFSL holder.

Which hardware business model are you insuring?

Anyone whose business ends with a physical object leaving the building. That covers more models than founders expect, and each sits differently with an underwriter.

An importer may carry manufacturer-level exposure in circumstances covered below. A prototype at a customer site is where policy treatment varies most, because many wordings were written with finished goods in mind.

Not sure which row fits? Talk to upcover with a description of what you make and who uses it.

Why do hardware startups need specialist insurance?

Because a single product can generate several different categories of claim at once, and the covers that answer them were designed separately. Four features drive that.

One design error repeats across the installed base. The same fault sits inside every unit shipped, so a small decision at design stage becomes a large number at volume. This is also why recall appears in this guide at all.

Some faults cannot be fixed remotely. A firmware update can change behaviour. It cannot recover a unit with a physical defect, close a compliance gap, or repair damage already done.

Bodily injury and property damage enter the picture. Financial loss is usually bounded by a contract. Injury is not, and it brings a different class of claim and a different limit conversation.

Which liability cover does a hardware startup need?

Four covers, four different allegations. Combined technology and manufacturing programmes can bring several together, but the definitions and exclusions have to align. So the useful exercise is knowing which one a given claim lands in.

Products liability, sometimes called product liability insurance, is cover for legal liability arising from goods you supplied. It commonly addresses bodily injury and property damage caused by a product you made, imported or supplied.

Professional indemnity commonly addresses negligent advice, design or professional services causing a financial loss.

Manufacturing errors and omissions, sometimes called financial injury cover, is cover for a customer's financial loss caused by a product that underperforms rather than one that breaks. Where available and expressly included, it addresses the gap between those two: a product that costs the customer money without injuring anyone or damaging anything. It is not a standard standalone product, and it is the cover hardware founders most often do not know to ask about.

Technology professional indemnity addresses firmware, embedded software and connected-device failures.

Which cover answers what

• Your design advice to a client was wrong → professional indemnity
• The device injures a user → products liability
• The device damages a customer's property → products liability
• The device works but underperforms, and the customer loses money → manufacturing E&O or financial injury, where arranged
• A firmware bug causes a customer financial loss → technology professional indemnity
• The device fails and a production line stops → products liability for damage, plus the efficacy and loss-of-use terms
• A connected device is breached and data exposed → cyber, and how it coordinates with products liability
• A prototype fails during a customer trial → depends on the products definition and the trial agreement
• Your installation damages a client's site → public liability

The one most often uninsured is the fourth, and four terms decide whether it is covered anywhere. Ask specifically about efficacy exclusions, which remove cover where a product simply does not achieve what it was meant to, plus failure to perform, loss of use and consequential loss.

Where Australian Consumer Law applies

Under the Australian Consumer Law, which the Australian Competition and Consumer Commission enforces, consumer guarantees apply where the purchaser meets the statutory definition of a consumer. That can include business purchases. Broadly, where goods cost under $100,000 including GST, or are of a kind ordinarily acquired for personal or household use, or are a vehicle or trailer mainly used to transport goods on public roads.

Goods acquired for resupply, or for use in production, manufacturing or repairing other goods, are generally outside it. Consumer guarantees are a separate regime from liability for goods with a safety defect. A product can fall outside the guarantees and still create safety-defect exposure.

Deemed manufacturer is the provision that catches hardware startups. A business supplying goods under its own brand may be treated as the manufacturer. An importer may be treated as the manufacturer where the actual manufacturer does not have a place of business in Australia.

Two things follow, and they are separate. What an Australian purchaser can claim from you is a matter of law. What you can recover from the overseas factory is a matter of your supply contract. A strong contract does not change the first.

How do RCM, EESS and ACMA compliance affect hardware insurance?

Two separate schemes share one mark. Electrical safety sits with state regulators through EESS; electromagnetic compatibility and radio sit with ACMA. Being out of EESS scope removes the registration step, not the obligation to hold safety evidence. And an insurer may ask for the same records a regulator would.

Compliance status is an underwriting question, not only a regulatory one. An insurer wants to know whether the product was lawfully able to be supplied. That shapes both the risk and how defensible a claim will be.

Two schemes, one mark

The Regulatory Compliance Mark is used by two independent regimes, which is a recognised source of confusion.

Electrical safety operates through the Electrical Equipment Safety System in participating jurisdictions. A Responsible Supplier is the business that manufactures, imports or supplies in-scope electrical equipment in Australia, and it must register itself there.

Equipment is classified into three risk levels under AS/NZS 4417.2, published by Standards Australia. Registration is mandatory for Level 2 and Level 3 equipment. It is voluntary for Level 1, though compliance evidence is still required. That evidence must generally be kept for five years after the equipment type was last imported or manufactured, and what counts as sufficient evidence differs across the three levels.

In some cases equipment families can be registered rather than every individual model.

Electromagnetic compatibility, telecommunications and radiocommunications sit with the Australian Communications and Media Authority. Products containing radio or telecommunications functionality may be captured. A single device can fall under more than one ACMA rule. ACMA obligations work differently from EESS equipment registration.

Holding one does not satisfy the other, and the records are kept separately. The ACMA supplier process has five steps: identify the applicable rules, demonstrate compliance, keep records, register as a responsible supplier where the applicable rules require labelling, and label correctly.

Out of scope does not mean no obligation

Suppliers of equipment outside EESS scope generally do not register it under the scheme. They still need evidence the equipment is electrically safe. AS/NZS 3820 and relevant product standards may form part of that evidence. Requirements differ between jurisdictions, so confirm the position where you supply.

So "we are not in scope" changes what you document, not whether you document.

Working out where your product sits? Bring your compliance position to upcover and the insurance implications can be checked against it.

What else may apply

Which apply depends on your product and where it is supplied. Editions change, so confirm the current position with the relevant authority.

Workplace duties for robotics and automation businesses

Where you design, manufacture, import or supply plant, work health and safety duties may apply to you as well as to the business operating it. Safe Work Australia publishes the model guidance, and each state and territory regulator applies it. Several parties can hold concurrent duties. Which duty attaches depends on your role and the jurisdiction.

Practically that means safe design, testing, guarding, instructions for use, and controls around modification and use outside the intended purpose. An insurer may ask about all of them.

Are prototypes and customer pilots covered?

Treatment varies, and it is the least predictable part of hardware placement. Many liability wordings were drafted with finished goods released for sale in mind, and a prototype is not that.

Six things to check before a unit leaves

1. The products definition. Does it capture pre-production units, or only goods released for sale?
2. The insured activities. Testing, trialling and demonstration may or may not appear.
3. Testing exclusions. Some wordings exclude products undergoing testing or evaluation.
4. Care, custody and control. If the unit is your property at a customer site, that changes which section responds.
5. Whether the prototype is insured property. Damage to the unit itself is a property question, not a liability one.
6. Territory. A pilot with an offshore customer can fall outside the policy territory entirely.

Two further questions that come up with connected products. Remote updates: if you push firmware to a unit in the field and its behaviour changes, which version was in place when an incident happened, and can you evidence that? Customer modifications: if the customer alters the unit or uses it outside the agreed scope, the trial agreement is where that gets addressed.

The trial agreement

Contracts and insurance need reading together, because each affects the other. A useful pilot agreement records that the unit is pre-production, addresses liability, and sets out who installs, operates and supervises. That gives both parties a clearer position.

Liability caps, indemnities, testing scope and consequential-loss terms are legal questions. Take advice on those. upcover can help align the insurance with what the agreement says.

Does insurance cover product recalls?

Partly, and the split matters. Standard liability commonly excludes or limits the first-party costs of a recall, while extensions and standalone recall cover exist.

The reporting deadlines

Two obligations, both short. Where you take action to recall consumer goods, the ACCC must generally be notified within two days. Not every product defect triggers a recall, and the ACCC sets out what consumer goods are and when the obligation applies.

Separately, a supplied consumer good associated with a death, serious injury or serious illness must generally be reported within two days of you becoming aware. Two days is a working-week deadline arriving during the worst week your business has had. Knowing it exists in advance is most of the preparation.

Which cover pays which recall cost?

• Third-party injury or property damage the product caused → products liability
• Retrieval expenses: locating units, notifying customers, transport, disposal → a recall expense extension, which is cover for the cost of getting product back rather than the harm it caused, or standalone recall cover
• Replacement cost of the product itself → generally your cost
• Lost profit during and after the event → separate, where available
• Crisis management and public relations → sometimes included
• Malicious tampering → a distinct insuring clause in some products

Availability at an early stage can be limited, and an insurer may want to see your traceability. A recall you can target is a very different risk from one you cannot.

Three things that reduce your exposure

1. Traceability. Batch and serial records that identify which units carry a defect. Without them, a fault in one batch becomes a retrieval of everything shipped.
2. Retained samples and test records. Evidence of what the unit was when it left you.
3. A documented change log. If a component was substituted mid-run, you need to know which units carry which version.

Insurers ask about all three. Find out what recall arrangement is available to you before your first volume run.

When should a hardware startup arrange insurance?

Not a revenue question. Nine moments change the answer, and most arrive before first revenue.

1. Your first device leaves the building. Including a friendly pilot customer, and including a unit you consider unfinished.
2. Your first sale to a purchaser who may be a consumer under the statutory test.
3. Your first import of a component or finished unit.
4. Before your first lawful supply. Compliance evidence needs to exist before the product goes out, not after an incident.
5. Your first sale into North America, which commonly changes terms, price and availability.
6. Your first volume production run, which changes both the exposure and the recall consequence.
7. Your first customer contract with an indemnity or uncapped liability.
8. Your first robot or automated system operating near people.
9. Your first outside investor or independent director, for directors and officers cover.

For the general startup picture, see when does a startup need insurance.

How do hardware startups insure stock, cargo and supplier failure?

Three exposures that sit outside the product itself and get arranged late.

Cargo and transit

Imported components and finished goods travelling by sea, air and road need marine cargo cover. A delayed or damaged container is not only a stock loss, it is a missed production window and possibly a contract breach. For the distinction between cargo and domestic transit, see marine cargo vs goods in transit.

Stock needs property cover. Tools, test rigs and equipment need tools of trade or plant cover, depending on what they are and where they travel.

Supplier and equipment dependency

Hardware supply chains concentrate. One foundry, one contract manufacturer, one specialist component. If that link fails, production stops for reasons unconnected to your own premises.

Business interruption cover generally responds to interruption at your own site following insured damage. Interruption originating outside your premises is a different question. It is sometimes addressed as contingent business interruption, which is cover for your own lost income caused by damage at someone else's premises. It responds to insured damage or interruption affecting a supplier or customer, depending on the wording.

Two things to check. It generally requires an insured trigger such as physical damage, so supplier insolvency, delay or poor quality usually fall outside it. And wordings differ on whether cover applies to named suppliers only or to any supplier.

Where you run production equipment, machinery or equipment breakdown cover is worth raising. It responds to mechanical or electrical failure of the plant, and standard property damage cover may not respond unless breakdown is included or separately arranged.

Intellectual property

Deep tech is patent-dense, which creates two different needs, and they are not the same product.

Defending an infringement claim brought against you. IP infringement cover is commonly an extension rather than a core feature, and extensions differ sharply on which rights they include. Some cover copyright and exclude patents, which is the wrong way round for hardware.

Pursuing your own rights against an infringer. That is IP enforcement or pursuit cover, and availability in the Australian market is limited.

Freedom to operate is the analysis of whether your product can be made and sold without infringing existing rights. It is a legal exercise rather than an insurance one, though an insurer may ask whether you have done it.

What does hardware startup insurance not cover?

Each of these is a question for your own schedule rather than a universal rule.

Costs that generally stay with you

The defective product itself. Resulting injury or damage may be covered. Replacing your own unit is generally your cost.

Faulty workmanship rectification. Reworking your product is yours. Damage it caused to something else is a different question.

Wear and tear and gradual deterioration. Insurance answers events, not ageing.

Pure consequential and economic loss unless specifically arranged. A customer's lost production is often the largest number in a claim and the least likely to be covered by default.

Cover that has to be arranged separately

Product retrieval and withdrawal, through a recall expense extension or standalone recall cover.

Machinery and equipment breakdown, unless included in or arranged alongside property cover.

Cyber. General and products liability may exclude or restrict electronic data and cyber losses. A connected device needs products liability, technology PI and cyber coordinated.

Two questions follow. Can one incident trigger more than one section, and how are related claims treated? And where a firmware fault causes physical damage, which policy is the lead, since that single event can look like a product defect, a technology error and a cyber incident at the same time?

IP enforcement, as distinct from defending a claim.

Terms that decide the outcome

1. Failure to perform, which determines whether an underperforming product is covered anywhere.
2. Known design defects, and faults you were aware of before the policy started.
3. Serial or batch defects, which some policies limit because one design error can generate many claims.
4. Undeclared modifications, including changes made after compliance testing.
5. Territory. North American exposure is often restricted or excluded.
6. Excluded categories. Some insurers exclude particular product types.
7. Regulatory penalties. These may be legally uninsurable, may be excluded, or may be covered only where the law permits. Defence and investigation costs are separate.
8. Prior known circumstances and late notification. Professional indemnity commonly operates on a claims-made and notified basis. See claims-made vs occurrence insurance.

How much does hardware startup insurance cost in Australia?

Here is what this section can and cannot tell you. It can tell you what drives the number and roughly where limits sit. It cannot give you a figure, because injury potential and territory create more spread in hardware than any other technology sector.

Two businesses with identical revenue can price very differently. One ships a desk accessory. The other ships a lithium-powered device that operates within reach of people. Injury potential outweighs almost everything else on the list. What moves hardware insurance pricing, heaviest first:

1. Injury potential, and who uses the device. A consumer product used by children prices differently from an industrial unit operated by trained staff.
2. Battery and lithium content, including capacity, chemistry, and how units are transported and stored.
3. Territory, particularly whether you sell into North America.
4. Compliance status. Documented evidence reduces both the risk and the argument.
5. Installed base and production volume.
6. Contract terms, including indemnities and liability caps accepted.
7. Field failure and claims history. A prior recall changes the conversation entirely.
8. Then the ordinary drivers: turnover, cover level, excess and limits.

Why no reliable average exists

No reliable public Australian benchmark exists for hardware startup insurance, because injury potential and territory create too much spread to average.

Limits are contract-driven. Products liability limits are often seen from $5 million upwards, and customer contracts, distributors and retailers may specify a figure above that. Treat any range as orientation and check your agreements.

Higher-risk products go to a specialist underwriter, which is a different route rather than a worse one. That covers autonomous systems, devices operating near people without guarding, and high-capacity batteries. A prior recall also moves the placement to a broker conversation.

How do you compare hardware startup insurance policies?

If you only do one thing

Read your products description against everything you currently ship. Include variants, accessories and anything you import. The most common coverage problem in this sector is not a missing policy. It is a description written two generations ago.

What information you need for a quote

• Business name, ABN and the entity that contracts with customers
• What you make, in plain terms, and who uses it
• Every product line and variant currently supplied
• Compliance status: EESS registration or documented out-of-scope assessment, ACMA records, test reports, standards designed against
• Quality management system status and any certification held
• Battery or lithium content, capacity and chemistry
• Where units are manufactured, and volume
• Batch and serial traceability
• Firmware update process, version control and how you evidence which version was deployed
• Safety incident and complaint logging
• Warranty terms you give customers
• Installed base, and field failure history
• Revenue split by product line and by country
• Pilot or trial programmes running now
• Customer contracts, indemnities and liability caps
• Claims and product recall history
• Limits your contracts require

Ready to compare? Get hardware startup insurance options through upcover with those details to hand. Availability and terms depend on insurer acceptance.

How can upcover help hardware and robotics startups?

Our view on this sector is straightforward. Hardware businesses are rarely underinsured because they skipped a policy. They are underinsured because the policy describes the product they launched with, and the business has shipped three generations since.

Standard process. Lower-injury-potential products, domestic sales, documented compliance and no prior recall can often be arranged for eligible businesses without a specialist referral.

Specialist referral. Robotics and autonomous systems, high-capacity batteries, devices operating around people, North American sales at volume, and any prior recall go to an underwriter who reads technical files.

That is not a filter. For a complex product it usually produces better terms than a standard process would, because the underwriter is pricing what your device actually does rather than what its category suggests. It takes longer, and the compliance folder does most of the work.

Either path ends the same way: terms to review, then a certificate on binding. Bring your compliance folder. A business that can hand over test reports and a current products list is easier to underwrite than one describing its device from memory.

upcover is a digital-first insurance broker helping Australian small businesses get the right insurance without the paperwork or phone queues. upcover arranges cover for technology and manufacturing businesses and engineers, including public and products liability, professional indemnity, marine cargo and management liability cover.

• Access to 80+ insurance partners, including specialist and agency markets
• 70,000+ Australian businesses covered
• 4.9/5 customer rating
• Instant Certificate of Currency on policy confirmation for eligible policies, which matters when a distributor is holding up an order

Related reading: public liability vs products liability, trades and construction, technology, media and digital, and the startup insurance guide.

upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.

Frequently asked questions

What is the difference between PI and products liability for hardware?

Products liability commonly addresses bodily injury and property damage caused by your product. Professional indemnity commonly addresses negligent advice, design or services causing financial loss. Most hardware startups face both allegations, and combined programmes can bring them together, but the definitions and exclusions need to align.

Is products liability legally required for hardware startups?

No Australian law makes it compulsory. But consumer guarantees apply where the purchaser meets the statutory consumer test. And many distributors, retailers and enterprise customers will not take a product without evidence of cover. In practice the requirement usually arrives through a contract.

What is manufacturing E&O insurance?

Cover for the gap between products liability and professional indemnity. It addresses a product that works but underperforms, costing the customer money without injuring anyone or damaging anything. Ask about efficacy, failure to perform and loss of use, since those terms decide whether the claim is answered.

Does products liability cover a customer's lost production?

Often not by default. Products liability generally answers injury and property damage. Pure economic loss such as lost production may be excluded or limited. It is frequently the largest number in a claim. Check the efficacy, loss-of-use and consequential-loss terms.

Is a prototype covered?

Treatment varies. Six things to check: the products definition, insured activities, any testing exclusion, care custody and control, whether the unit is insured property on site, and territory. Ask the insurer directly rather than assuming either way.

Am I liable if a component supplier fails?

Possibly. Under Australian Consumer Law a purchaser may look to you as the supplier. You may also be treated as the manufacturer in two cases: where you supplied under your own brand, or imported goods where the manufacturer has no place of business in Australia. What you recover from the supplier depends on your contract with them.

What if I sell into the United States?

Tell your insurer before you ship. North American product exposure commonly attracts different terms, higher pricing or exclusion, and it is a common territory gap in hardware policies.

Does insurance cover a robot causing injury?

Injury and property damage caused by plant you supplied sit under products and public liability, subject to the terms. Appetite varies with how the system operates around people and what guarding and controls exist. Work health and safety duties for plant may also apply to you, and several parties can hold duties at once.

What insurance is needed before a customer pilot?

Settle three things first. Whether the policy covers pre-production units and testing. Whose property the device is while it is on site. And what the trial agreement says about liability, which is a question for a lawyer rather than a broker.

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_{This article is general information only, last reviewed August 2026. It does not take into account your objectives, financial situation or needs, and is not personal advice. It is not legal, product safety, recall, compliance or engineering advice. Electrical safety, electromagnetic compatibility, product safety, recall and work health and safety requirements are set by the regulators and standards bodies linked in this article, differ between states and territories, and change over time, so confirm the current position with the relevant authority before relying on any summary here. Insurance market observations describe common practice rather than universal rules, and cover, limits, inclusions and exclusions vary between insurers, so read the relevant policy wording, schedule and any Product Disclosure Statement where applicable before deciding whether a product suits you. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078, and arranges insurance with selected insurers and underwriters rather than the whole market.}