Your business insurance portfolio needs to cover various areas and multiple risks. Here’s how to determine what type of business insurance policies you should consider.
Sussing out the insurance needs of a business can be complex, as there are multiple areas and different potential risks you need to cover.
Depending on the type of business you are operating, you may also require specific policies. Also, some types of business insurance are required by law.
If you’re wondering what kind of business insurance you should get, here’s a framework that might be useful.
Every business is essentially an interplay between three major areas — your products and services, your employees, and your customers. It follows, then, that your business insurance portfolio would need to address each of these three areas.
While this framework is highly simplified and by no means covers every possible type of business out there, it does give us a useful starting point when considering how to meet your business insurance needs.
What are the three types of insurance that every Singaporean business needs?
Simply put, the various types of insurance policies that your business would need fall into three categories: property, employee, legal and business liability.
Each of these areas can be covered using different types of insurance policies. See the following table for a summary.
|Area of business||Insurance coverage required|
|Property||Fire, theft, terrorism, business interruption|
|Employee||Healthcare, work injury|
|Legal and business liability||Public liability, director and officer insurance, professional indemnity, cyber liability|
Let’s start with property insurance, which is the most simple and straightforward category of the three.
A property insurance policy for your business will cover your commercial premises against loss or damage arising from common risks such as fire, accidents, theft or burglary.
Meanwhile, terrorism insurance can be used to cover against acts of violence or other unlawful acts taking place in your place of business. This type of policy will cover both people and property against injury, loss or damage.
On a related note, business continuity insurance is also important, as the aftermath of an accident (say, your storefront gets smashed in by a runaway car) can mean being forced to stop business for a period.
If you have a business continuity policy, you can tap on it to make up for the loss of income, compensation for lost wages, or other ongoing expenses such as rent.
For employee insurance, there are two sub-categories to consider. We’ll be discussing each one in turn.
Providing basic healthcare has become a common and widespread practice in Singapore. It’s readily available and relatively affordable via a group insurance plan, and allows your company to show that it cares for its employees.
Employees who are Singapore citizens and Permanent Residents (PRs) already have basic healthcare in the form of Medishield Life, so you are not legally required to provide them with health insurance.
However, you may wish to provide additional medical and healthcare benefits, such as for dental and eyecare.
For foreign employees — i.e., holders of Employment Pass, S Pass and Work Permits — the requirements are slightly different.
As only citizens and PRs are eligible for Medishield Life, all foreign employees are excluded. This would leave them without basic healthcare during the course of their employment in Singapore.
For that reason, labour laws require employers to provide S Pass and Work Permit holders with healthcare insurance, so do take note if you’re planning on hiring such workers.
Meanwhile, there are no legal requirements to provide Employment Pass holders with healthcare insurance. Perhaps the thinking is that they can afford to pay for basic healthcare themselves.
Despite this, you may still voluntarily extend basic healthcare to these types of employees to boost their compensation package.
Basic healthcare insurance and workplace injury insurance are two different areas of insurance, although many insurers often offer both benefits bundled as one.
Work injury insurance specifically covers loss or damage arising from an incident that took place during the normal course of work.
For example, if an electrician fell from the ladder while working on an overhead fixture, breaking his arm, work injury insurance can be used to provide them with compensation.
Do note that work injury insurance is mandatory for the both local and foreign employees who are:
- involved in manual work, regardless of salary
- involved in non-manual work, earning a monthly salary of S$2,600 or less
Legal and business liability
While property insurance covers your premises and inventory, and employee insurance covers the people working for you, legal and business liability is concerned with mitigating the risks of running a business.
There are four main areas to note here: public liability, director and officer insurance, professional indemnity and cyber liability.
Broadly speaking, public liability insurance covers your business against claims made by a member of the public, such as a customer or a passer-by, for damages, injury or loss arising from an incident involving your business.
This can cover anything from an accident that took place in your shop, to losses stemming from the use of your product or service.
Public liability insurance is crucial because it can prevent your business from taking a catastrophic financial loss.
Director and officer insurance
Director and officer (D&O) insurance is designed to shield individuals from personal losses arising from lawsuits or legal action taken against them while performing their duties.
This is usually only applicable to those in high-ranking roles with enough responsibility and power to render them culpable for damages sought by plaintiffs.
D&O insurance can also be used to cover legal costs incurred while bringing or defending against a lawsuit.
Businesses such as medical practices, financial advisory, consulting and contracting revolve around providing professional advice to clients.
Whether intentional or otherwise, a breach or negligence of duty could cause clients to suffer losses or damages, which could lead to a lawsuit.
Should this occur, having a professional indemnity insurance plan will be helpful, as it can be used to settle any claims filed against your business. This type of insurance can also cover the legal costs of fighting the claims.
Cyber liability insurance protects your business against the financial fallout of suffering a hack or a data breach.
It is used to settle claims from affected customers who suffered harm due to their personal data or sensitive information being stolen from your database. It may also cover regulatory defence and penalties.
More commonly, cyber liability insurance may be used to pay for the costs of recovery actions necessary to restore your customers’ confidence, such as monitoring services to detect fraud.
Cyber liability insurance may be bundled with cyber security insurance; the latter typically covers against the costs of ransomware attacks and loss of digital assets.
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