So, what’s business insurance?
As the name suggests, it’s insurance for your business! Most importantly, it protects you from legal liabilities and losses you might have to bear if something unfortunate happens during the course of business.
But business insurance doesn’t just protect your business; it’s also an essential tool for safeguarding the interests of your employees and even your customers from the potential risks of accidental and unexpected loss.
What types of cover are there?
Business insurance can broadly be classified under 3 areas: Property, Employees and Legal Liability.
There’s a wide variety of covers, and as every industry has unique risk exposures, there are covers specific to certain industries. However, here are the ones you’ll most likely need:
|All Risks (Contents)||Typically compensates the business for loss or damage at premises due to accidental and unforeseen causes. E.g. theft without forcible or violent entry|
|Work Injury Compensation||Compensates the business against work accidents or illnesses claims, relating to your responsibility as employer|
|Public Liability||Covers claims for injury or property damage suffered by a third party due to negligence from your business activities|
|Business interruption (gross profit)||Covers loss of profit while you’re unable to run your business as usual following property damage|
|Increased cost of working||Covers costs that may be incurred following property damage, such as express repair or clean-up service, so your business can be up and running in a shorter time|
|Money||Covers for loss of cash, vouchers, credit card sales and cheque books while it’s in your business premises or in transit|
|Fidelity guarantee||Covers loss of money or other property as a result from any act of fraud or dishonesty committed by your employees|
|Plate glass||Covers breakage of glass due to accidental and unforeseen causes|
Not all the above-mentioned types are compulsory and you can customise a plan that suits your needs and the nature of the business. Plan offerings differ from insurer to insurer. For instance, Aviva’s MyBusiness Insurance offers a core cover which includes All Risks, Public Liability and Work Injury Compensation, and it gives you the option to add-on other covers that you can choose according to your unique business risks.
Of course, if you’re not sure about the type of coverage you need, you can always turn to your preferred financial adviser representative for help.
Still confused about business insurance? Here’s an example
Let’s use the case of Ronald, a restaurant owner, to understand how business insurance works. Here are some situations where business insurance could be helpful for him:
How it could help Ronald
All Risks (Contents)
Should a fire completely destroy the tables, chairs and reception area in Ronald’s restaurant, this cover allows him to make a claim that can help manage the cost of getting new furniture. Or if lightning strikes the electricity supply at the restaurant, cutting power to the fridge which contains high-value cold items, there could be significant food spoilage. Ronald would incur heavy costs to replace the food.
Work Injury Compensation
Should a chef at the restaurant accidentally get his hand crushed while using a heavy-duty food mincer, they can make a claim for medical expenses under WICA. This could include surgery, medication and therapy. By law, Ronald would be liable to settle this claim. With the Work Injury Compensation cover, his business would be protected from hefty claims.
If a customer slips and falls due to spilled liquids on the restaurant floor due to the restaurant’s negligence, Ronald might have to cover the ambulance ride to the hospital, hospitalisation fees and medical expenses. In this case, the Public Liability cover will kick in and cover thos e costs.
Business interruption (gross profit)
If a massive flood causes water to enter Ronald’s first-storey restaurant, causing extensive damage to the wooden flooring and furnishing, he could be forced to suspend operations for days or weeks for clean-up and repairs. In this scenario, he’d suffer loss of business earnings. The Business Interruption (Gross Profit) covers his revenue loss, so he can keep up with staff wages, utilities and other ongoing costs he’d usually have to manage if the mishap did not occur.
Increased cost of working
Following a fire that damages his restaurant, Ronald may face costs such as express repair or clean-up service, so his business can be up and running as soon as possible. The Increased Cost of Working covers such expenses, so he won’t have to worry as much about losing customers or extensive disruption to his business.
For instance, if the weekly cash earnings that Ronald’s secretary intends to deposit into a bank account gets stolen on the way to the branch, the monetary loss would be covered under this cover.
Should money that Ronald had kept locked in a safe for cash-on-delivery purchases get stolen by an employee, he’d have no way to recover his losses. But with the Fidelity Guarantee, this loss would be covered.
For instance, if the glass facade and doors of Ronald’s restaurant are shattered in an attempted burglary, he can be assured he's covered.
Now imagine if one of these occurred and Ronald didn’t have a comprehensive insurance cover for his business. As he can’t avoid the potential restoration works or legal fees, he could end up having to shell out money from his own pocket or take various loans to cover these expenses. But having a good insurance cover will limit the financial damage.
Does Ronald need business insurance?
It’s mandatory for all Singapore businesses to have Work Injury Compensation cover and Commercial Motor insurance for their commercial vehicles. To protect the other aspects of his business, Ronald should review his business protection needs before getting suitable coverage.
What are the factors affecting Ronald’s business insurance premiums?
- Nature of his business
- The number of employees
- Annual turnover
- The level of coverage needed (e.g. sum assured)
Based on these factors, Ronald can customise his policy so his business is adequately covered.