We all know that it's important to get a personal health insurance but do business owners know the importance of a suitable business insurance?
Profits and cash flow at many small and medium (SME) firms are probably tight and they may have little spare cash and time to concern with issues outside day-to-day operations.
Therefore, it’s important to have the right business insurance coverage so as to provide a safety net against unexpected trouble.
Business insurance varies by industry and needs. The one-size-fits-all coverage of the past has been replaced by customised policies for industries.
For instance, an insurance policy for a restaurant would cover the owner against food-poisoning claims, while the same policy will be redundant for a spa outlet owner.
If you are having difficulty determining which kind of insurance your business requires, check out our primer to the different policy types below:
Business Insurance Policy Types
Business insurance can be divided into six broad categories:
1. Business property insurance
Business property insurance provides coverage for loss or damage (such as fire, flood or natural disasters) to your property.
It reimburses the insured party for loss or damage to building, stocks, machinery and equipment, plant and contents.
2. General liability insurance
General liability insurance covers businesses in case of bodily injury to someone that occurs on your premises.
For example, this type of insurance would cover you should a client trip over a wire in your product showroom and caused a serious injury
This protects you in case a product that you produced or sell caused harm to the user
3. Business Interruption Insurance
While insuring your physical assets is no doubt important, a business can face a period of disruption following a disaster and incur further financial stress due to lost income.
Owners will also need to continue paying for rent, interest on borrowings and employees' wages despite business disruption
4. Commercial automobile insurance
Such insurance provides protection against damages caused by the vehicles used for business purposes, and is similar to personal auto insurance.
Look for a comprehensive coverage that provides compensation for vehicle damages resulting from fire, theft, accidents and liability coverage which protects you from being sued in an accident involving a company vehicle.
5. Business umbrella insurance
Think of such policies as your health insurance rider policies. They provide extra coverage that kicks in when the limits of your primary insurance policy are reached.
An umbrella policy can often offer several hundred thousand to more than a million dollars’ worth of extra coverage for as little as a few hundred dollars.
6. Employee Insurance
If your company employs manual workers, employees can make claims under the Work Injury Compensation Act.
To give your employees better welfare, you might want to look into taking up group health insurance, employee accident and/or hospitalisation policies.
Some of these are not mandatory under Singapore law but it can also protect business owners against liability claims if employees injure themselves due to work-related incidents. If your business requires frequent travel overseas, group travel insurance might be a prudent choice as well.
SME Insurance Packages
In Singapore, a number of private insurers offer SME packages which provide a basic business insurance coverage for different aspects of your business.
These typically provide coverage against fire and other damage to physical assets, theft, loss of money, work injuries and public liability.
If you are looking for a basic insurance package while keeping your cost low, this could be a good option for you.
Reading The Fine Prints
Once you have selected the right type of insurance for your business, you’ll need to determine the appropriate limits and deductibles to suit your needs as these factors can impact the amount of premiums you pay.
An insurance deductible is the fixed amount of an insurance claim which the insured has to pay before the insurance kicks in. The general rule is that the higher the deductible, the lower your insurance premiums.
While it may make sense for your monthly cash flow to choose the highest deductible and lowest premium, it may be exposing your business to a serious risk.
Imagine having to pay for a high deductible while facing business interruption before you can submit your claims. Thus, the best way is to ask yourself if your business can afford to pay this deductible in the event of an incident.
Work with your insurance professional to maximize coverage while making the premiums affordable.
When asking for quotations from different insurers, remember that policies from may have the same name but not the same coverage.
Be very clear on what is and is not covered in the policy you choose.
Data as Property
In this age of internet, many businesses operate a large part of their business online. Coverage for damages to property, usually applies only if the property is tangible or the damage is physical.
If you provide computer software or virtual services, make sure you ask if your policy covers such losses.
General Liability excludes professional liability General liability insurance is the most common type of business liability insurance. This
For this, you'd need to take out errors and omissions coverage, which is the service equivalent for a product liability insurance.
As with buying a personal insurance, it's always advisable to have a knowledgeable agent on your side.
Since most business insurance can be customised, it'll be beneficial to consult your agent to ensure you're covered for all risks and choose a policy which balances out your business risks and the premium you'd need to pay.