How Does Business Insurance Work?

 

Business Insurance is catered towards the specific needs of businesses, and the protection of all business assets and interests. Just as individuals seek protection against common risks, businesses also need to be covered against certain risks inherent in the course of operating a business. If you are a business owner, getting started on tailored business insurance is the best investment you can make for your company.

There are multiple parties in a business (owners, staff, workers, clients, suppliers, partners). This means that businesses are exposed to a variety of unique risks, liabilities and vulnerabilities that require comprehensive commercial business insurance to fully protect itself and minimize possible damage.

Selecting the best Business Insurance coverage and policies requires vast industry experience and top know-how through experienced insurance providers that will guide you to select suitable insurance policies for your business and industry.

 

What are the Differences Between Business Insurance and Personal Insurance?

 

If you’re thinking about starting a business, you may be wondering if Business Insurance is really a key requirement. No matter the industry or available capital on hand, it is extremely important to consider purchasing Commercial Insurance. Without it, you could find yourself in an unexpected and irreversible situation, forced to use your hard-earned savings or go into debt while attempting to salvage the business.

Insurance coverage protects individuals and corporate companies from unexpected and unforeseen events that could lead to financial losses. Purchasing insurance helps to protect and defend the things you have invested in. Both insurance types serve different purposes, and both are valuable. It is important to know the difference between Personal Insurance and Commercial Business Insurance because one deals with a single life and the other deals with all business activities of a company entity as a whole.

Some main differences:

  • The Name Insured
  • Property Type
  • Coverage Providers

In this article, we will be expounding on Business Insurance types and what Singaporean businesses need to consider before starting a business.

 

Commercial Business Insurance in Singapore

 

Business insurance is a range of insurance solutions designed for businesses to manage their risk exposures. It is also called commercial insurance or corporate insurance or simply, SME insurance. Businesses buy business insurance to protect themselves against financial losses resulting from lawsuits or physical damage to their business property assets as well as protection for their employees. Without commercial insurance, businesses may put their company and personal assets at risk if a loss occurs. As such, it is financially prudent for businesses to protect themselves with a comprehensive business insurance program.

 

Types of Business Insurance Coverage in Singapore

  1. Property Insurance: Protecing Your Property

Mishaps can happen, even with safety precautions in place. If your commercial property is destroyed by fire, flood, etc, hefty sums will be required to repair, replace, reinstate the premises, contents, machineries, etc.

Property Insurance covers loss or damage to your insured property i.e. business premises and assets; and coverage can be arranged on “All Risks” or “Fire and Extraneous Perils” basis. The former is a more comprehensive coverage as it covers accidental loss of or damage to the insured business property unless specifically excluded in the policy while the latter covers loss or damage to the insured property due to:

  • Fire
  • Aircraft damage
  • Bursting or overflowing of water tanks, apparatus, or pipes
  • Earthquake, volcanic eruption, hurricane, cyclone, typhoon and windstorm and flood arising therefrom
  • Full flood
  • Explosion
  • Impact by road vehicles
  • Riot and strike
  • Malicious damage

Property refers to buildings, plant & machinery, equipment, stocks, renovations, furniture, fixtures, and fittings, etc.

Theft/Burglary Insurance

This form of business insurance covers your loss of business assets within your business premise against theft and burglary. These business assets include:

  • Office equipment
  • Plant and machinery
  • Stock-in-trade
  • Business-related goods

Business Interruption Insurance

The intention of a Business Interruption policy is to return the business back to the same financial position had the loss or damage to the insured property not occurred. A business interruption policy can be arranged to cover the following:

  • Loss of revenue/profits
  • Daily cash benefit
  • Rental of temporary premises
  • Fixed operating expenses
  • Reasonable expenses for business to continue operating
  • Employee salaries

Fidelity Guarantee Insurance

Fidelity Guarantee Insurance provides coverage against any direct financial loss sustained by the business through acts of fraud, dishonesty, forgery, or theft committed by the employees in connection with their occupation and duties.

  1. Employees Insurance Coverage: Protecting Your Employees

The 2 most important employees’ insurance coverage are Work Injury Compensation Insurance and Basic Medical Insurance. It is also a statutory requirement to cover certain categories of employees.

(a) Work Injury Compensation Insurance

Work injury compensation insurance protects your business if your employees file claims for injuries or diseases suffered while working.

Under the Work Injury Compensation Act (WICA), all employers are required to purchase work injury compensation insurance for local or foreign employees performing:

  1. Manual work, regardless of salary level; and
  2. Non-manual work and are earning less than $2,600 monthly. (Threshold increased on 1 Apr 2021)

Employers who fail to do so face a fine of up to S$10,000 or jail of up to 12 months, or both.

Work injury compensation insurance provides monetary protection in the form of payment of medical leave wages, medical expenses and compensation for permanent incapacity or death should your worker suffer any injury in the course of their work.

Besides covering the employer’s liability under the Work Injury Compensation Act, the policy can also protect employers against legal liability arising from claims by employees at Common Law.

(b) Basic Medical Insurance

Singaporean Employees: CPF & Medishield Life

The Employment Act requires all employers to make CPF contribution for all Singaporean and Singapore Permanent Resident (PR) employees, a portion of which will be allocated to Medishield Life. Medishield Life is basic health insurance only for Singaporeans and Singapore PRs that provides lifetime protection against large hospital bills.

As part of an employee’s benefit program, employers have the option to buy group hospitalisation and surgical policy to supplement the Medishield Life for their employees. This policy can also include personal accident, outpatient clinical/specialist consultation and dental coverage.

S-Pass & Work Permit holders: Foreign Worker Medical Insurance

Under the Employment of Foreign Manpower Act, employers must buy and maintain Foreign Worker Medical Insurance for their S-Pass holders and Work permit holders as long as they are under your employment.

This insurance should cover inpatient hospitalisation and day surgery expenses for non-work-related conditions of at least $15,000 per year.

Employment Pass holders: Group Medical Insurance

Employment Pass (EP) holders are not covered under Medishield Life and Foreign Worker Medical insurance. To cover these employees, employers may purchase group medical insurance which typically includes group hospital and surgical, personal accident, outpatient clinical/specialist consultation, dental coverage.

As EP holders are eligible to purchase integrated shield plans, employers may also consider subsidising the costs as part of their employment benefits.

  1. Legal Liability: Safeguarding Your Business

Allegations are cheap to make and expensive to defend. Liability Insurance provides businesses with protection against claims resulting from injuries and property damage. It can cover both legal defence costs and any compensation for which the insured party would be responsible if found legally liable. The below are the types of commercial business liability insurance available:

  • Public Liability Insurance – Protects against claims by third parties for bodily injury or property damage resulting from your business operations and premises.
  • Product Liability Insurance – Protects against claims of personal injury or property damage caused by products manufactured, sold, supplied, or distributed by your business.
  • Directors and Officers Liability Insurance – Protects company directors and officers in the event they are personally sued for actual or alleged wrongful acts in their capacity as directors and officers of the company.
  • Professional Indemnity Insurance – Protects from legal actions taken against your business if someone suffers a loss from your professional service or advice.
  • Cyber Liability Insurance – Protects businesses from internet-based risks, such as data breaches or malicious cyber-attacks on computer systems and networks.
  • Advertising Liability – Protects against claims of defamation (libel or slander) and copyright, intellectual property rights infringement arising out of the businesses’ advertising activities and collaterals.

  1. Commercial Motor Insurance: Protecting Your Assets

If your business owns a commercial vehicle i.e. lorry, van, etc, Commercial Vehicle Insurance is a mandatory cover under the Motor Vehicles (Third Party Risks and Compensation) Act. Vehicles must be insured with a minimum coverage of Third party only Insurance before they can be used on the roads.

  1. Industry Specific Insurance

Some businesses are exposed to risk inherent only in their industry. For instance, a transportation company or freight forwarder is responsible for the goods they are carrying and can take up Cargo Insurance to protect the goods in transit. And a construction or engineering company will need to effect Contractors’ All Risks or Erection All Risks coverage before project/contract works can commence.

 

How can ALLEGIANCE help?

 

Every business faces a certain amount of risk. Although pitfalls and challenges cannot be eliminated, they can be mitigated with the proper precautions, planning and insurance coverage. Businesses are then better prepared to weather risks, limitations, challenges or disruptions while maintaining business operations.

It is important to first understand the nature of your business and the business processes to perform a risk analysis. With this knowledge, the insurance program can then be structured to cover as wide as possible, the risk exposures at various stages of the business process. Each business owner has a different set of needs and goals that can be achieved with the right combination of insurance policies and risk coverage. Expert advice on which business insurances to purchase can be a lifesaver.

At ALLEGIANCE, our team of experienced insurance providers are able to recommend the appropriate coverage for your business with relevant policy extensions to be included in the policy as well as “buying back” exclusions which are not favorable to your business operations, subject to the insurer’s approval.

  • ✔️ Custom Coverage & Comprehensive Business Insurance Plans
  • ✔️ Simple, Convenient & Easy Consultations with Our Expert Advisors
  • ✔️ Fast Quotations & Reliable Claims Process
  • ✔️ Fuss-Free Applications & Insurance Plan Renewals
  • ✔️ 5-Star Service Testimonials & Client Success Stories

For a discussion, contact us today at 6513 6983 or email: client.service@allegiance.com.sg