If you are an entrepreneur, you will know that starting a business requires courage and hard work.
The journey starts the very moment you pick a business model, before you pull in the right partners and securing funds for your venture. Then it gets to incorporating the business, building an online presence through social media and website, and maybe getting an office space, before the business gets up and running.
Just when you think that all these should be sufficient to get set the motion, you should consider getting your business adequately insured.
Although business insurance adds to the expenditure, it can help your business survive the toughest period of time by alleviating financial burdens arising from damages or loss or property, or injuries sustained during course of work.
Just like in life, perils may happen when you run a small business. Accidents occur, things break down every now and then, and legal liabilities arising from your business operations may happen. This is where business insurance comes to help your business tide through difficult periods.
Here we discuss the five important business insurance you should consider getting.
#1 Work Injury Compensation Insurance
The first insurance you should ever consider getting for your business is the work injury compensation insurance, especially if you have employees managing the day-to-day operations of your business.
This insurance provides cover for your business in the event your employees file claims for injuries sustained at work, by providing monetary protection in the form of payment of medical leave wages or expenses to your workers.
In fact, under the Work Injury Compensation Act, you are required to purchase work injury compensation insurance under the following circumstances:
Manual work – All local and foreign employees doing manual work, regardless of their salary, are required by the Act to be covered under the insurance.
Non-manual work – All local or foreign employees doing non-manual work, and earning S$1,600 or less a month, are required to be covered under the Act. Do note that the income threshold will be increased to S$2,100 in April 2020, and to S$2,600 in April 2021.
For other employees that do not fall under any of the abovementioned conditions, while you have the flexibility to decide whether to buy insurance for them, you will have to compensate them if they make a valid claim, regardless if they are insured or otherwise.
Do note that the requirement for coverage under Act does not apply to freelancers or independent contractors.
#2 Property Insurance
As the name implies, property insurance protects your business from losses due to damage of your business properties.
Such properties include computers and electronic equipment, stocks of items you are selling, your office space, as well as fittings, fixtures and furniture in your office.
Even if you work from home instead of renting an office space, you should still consider getting insured.
Purchasable insurance that can provide coverage for the abovementioned properties include:
Fire insurance – Fire insurance provides coverage from damages due to fire, but could also extend to other threats such as flooding due to bursting and overflowing of water pipes, and malicious damage.
Theft insurance – Theft insurance provides coverage arising from losses incurred in an event of burglary or robbery.
In addition, if your business requires the use of information technology infrastructure in the course of operation, you should also consider signing up for cyber-insurance.
Cyber-insurance provides coverage for your business from internet-based risks, such as data destruction, data theft and denial of service attacks, which are typically excluded from or not specifically defined in traditional insurance products.
#3 Business Interruption Insurance
While we mentioned earlier that fire insurance will cover any material damage caused by fire, flooding and malicious damage, it does not cover the period of business interruption arising from such damages, which can cause an impact on the bottom line of your business.
This is where business interruption insurance will come in to complement the fire insurance.
As the name suggests, the insurance helps to recover any income your business would have made during the time it was forced to remain shut, such as after an event of a fire or flooding, where time is required for damages to be repaired.
The insurance provides coverage for loss of profit, rental, standing charges, salaries on payroll basis, and the increased cost of working due to interruption.
#4 Legal Liability Insurance
When it comes to running a business, there is always an unfortunate risk that your business can be held liable due to professional negligence in the course of work. This is where legal indemnity insurance will come in to provide coverage when such liabilities occur.
Depending on the nature of your business, you should consider the following legal liability insurance:
Public liability insurance – Public liability insurance covers your business from any legal liabilities related to the operations of your business.
Examples include bodily injury or damage to property and premises, resulting from the operations of your business, or from the manufacturing, distribution or sales of your product.
Professional indemnity insurance – Professional indemnity insurance is designed to cover the costs in the case of litigation arising from professional negligence, such as not meeting a target on time, providing poor advice, or making serious mistakes in the delivery of a service.
This insurance is usually specific to a professional occupation or industry; some examples include auditors, lawyers and accountants.
#5 Fidelity Insurance
There is an old Chinese saying: “A thief from within is hard to guard against,” and this applies to your business as well.
This why you should also consider taking up fidelity insurance, so as to protect your business from any monetary losses arising from dishonest acts by your business partners or employees.
Depending on the policy, the insurance usually covers financial loss arising from embezzlement and fraudulent use of company funds, to theft and misappropriation of goods.
However, do note that this insurance does not usually cover losses such as third party loss, indirect or consequential loss, inventory loss, as well as losses arising from extortion.
Picking The Right Insurance For Your Business
Just like signing up for a life insurance policy, you should first understand the nature of your business and the possible risks that you will anticipate, before you pick the right insurance coverage.
What you can do it is by performing a threat assessment of your business, so as to best determine the scope of your liability in the event any unfortunate situation. Alternatively, you can consult a licensed insurance broker who is familiar with your business or industry, who can advise you on the appropriate insurance.
In addition, you can also consider signing up for a comprehensive policy package that covers many of the liabilities a typical small and medium enterprise may encounter, such as public liability and work injury compensation, in a single policy. Insurers like Aviva and AIGoffer such policies.
While business insurance is not an amulet that protects your business from calamities or untoward situations, but it offers monetary protection and coverage for your business, should the worst-case scenario happen.
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