From the day you make the bold decision to start your own business, you expose yourself to a number of new risks – not only in terms of your own person, now that you are no longer work for a company that offers a group benefits package, but also the business operations itself. One catastrophic event could wipe out a small business – and with it your and your family’s income and security. You need to insure that business!
When looking at the range of insurances they need, most small-business owners tend to focus on the biggest risks first, including:
- The risk of law suits should your employees or your products or services cause bodily injury or property damage to any other individual. Indeed, cover against this risk is something that many potential business clients require before they will even consider dealing with you.
- Risk to property of all sorts: from your actual premises to stock and equipment.
- The risk of business interruption and loss of earnings which could follow a fire or some other catastrophic incident that could close down operations temporarily.
- Death, dread disease, disability and income replacement: as you now no longer have a company benefits scheme, including the right to annual sick leave, you will need some security. If you’re temporarily or permanently unable to work, you will have no personal income without it.
Types of cover you’ll need
To manage these risks better, the following cover is what you will need. It is possible to get these in a single package, which is often cheaper. Sometimes called a business owner’s policy, it packages all required cover a business owner might need, though it can be adapted to your company’s specific needs.
General liability insurance: Liability insurance is a standard element of most business owner’s policies. It refers to coverage for injury to another person or damage to a person's property for which you are legally responsible, usually because it happened on your premises. In addition, if you are in the business of manufacturing products for sale, then product liability insurance is essential in the event that such a product causes harm to a user or a user's property. It is especially important for companies that produce food, clothing, toys or anything that could conceivably cause harm to someone.
Property insurance: If you own your building (or even lease it depending on the lease conditions) you need to insure it along with your office equipment and furniture, signage and inventory in case you have a fire, theft or vandalism. Many entrepreneurs begin their small businesses out of their garages, study or even backyard, and should note that homeowner’s policies don’t cover home-based businesses in the way commercial property insurance does and should add additional insurance to their homeowner’s policy to cover equipment and inventory in the event of a problem.
Business interruption: Fire and hail are two of the most common catastrophic events that occur in South Africa. In the event of fire, a business’s operations will most likely be interrupted and income lost due to your (and your staff’s) inability to work or manufacture products. Business interruption insurance compensates a business for any income lost following such events.
Personal and commercial automobile insurance: this protects both your own and, if you have any, your company’s vehicles where they may carry employees, products or equipment. If employees are required to drive their own cars on company business you should either make sure the employee has his or her own adequate insurance, or look at covering this risk as part of the business’ general liability cover should an accident occur – especially if they are delivering goods or services for a fee.
There are also some compulsory regulatory insurances, such as Worker’s Compensation and UIF: Worker’s compensation provides insurance to employees who are injured on the job, and as a business owner, it is essential to have Worker’s Comp because it protects you from legal complications.
Professional liability insurance: if you are operating a professional firm of lawyers, accountants, consultants, real estate agents, insurance brokers or technology providers, it is often a condition of professional membership that you have professional liability insurance, covering the business against claims due to negligence.
Dread disease cover, disability insurance & income protection: Having cover in the event of a dread disease, disability or simply being unable to work for a prolonged period after an accident or illness, means that you have financial protection against loss of income and medical expenses not covered by your medical aid. Income protection (called Expense Protector at 1Life) covers your personal salary as opposed to business interruption insurance which covers the business’ income.
There are many other types of insurance which you will need to look at once your business is more established, such as Key Man Insurance and Data Protection cover. We will cover this in another, later article.