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Running a business is stressful enough without the risk of losing substantial amounts of money due to theft or damages incurred. Insurance is there to protect against loss of your investment and financial impairment to your business. At InsuranceBusters we offer tailored products for all small to medium sized businesses.
Tips On Small Business Insurance
Getting ready to launch your small business, or already have a small business? Before you clink together the champagne flutes in celebration, you should be sure you're covered by insurance. Protect your investment, and prepare for the worst.
This guide is put together to alert you to the various cover that you may require for your business. This is purely a guide, to get a more information you can fill in an enquiry form and a specialised commercial insurance broker will contact you to discuss your situation and advise you as to what coverage options may be best for you. You've invested too much time and money building your business to not learn how to protect your investment.
Top small-biz tips:
1. Errors & Omissions Insurance - Regardless of what kind of business you own, customers can claim that something you did on their behalf was done incorrectly, and that this error cost them money or caused them harm in some way. Formalising a contract with your clients can help limit your liability, but the big expense in an E&O claim is the legal defence needed to prove innocence. E&O policies are designed to cover these defence costs.
2. "Hold Harmless" Agreements - Of course, there are some things you can't prevent, like storms, power failures, or accidents. But fortunately, there are ways of minimising either the likelihood something will occur, or the impact it will have on your business after it does. A "Hold Harmless" agreement is a risk management tool that shifts legal and financial risk from you to another party.
3. Specialised Commercial Insurance - Does your business face unique risks? For example, do you manufacture food products that may be vulnerable to contamination and product recall? Or do you often carry tools to your customer's work site, and need to make sure your property is protected off-site as well as on-site? Most times, specific coverage can go a lot further than a general, pre-packaged deal. Whatever your industry, chances are there is commercial insurance coverage tailored to your specific risk factors.
Small Business Insurance FAQ
Getting Insurance for Your Small Business
Operating a business is difficult enough without having to be concerned about suffering significant financial loss, or worse, due to unforeseen events occurring. Insurance is there to protect against loss of your investment and financial impairment to your business.
Some of the most commonly asked questions regarding commercial insurance are discussed below:
How do I go about obtaining business insurance?
The first step in obtaining proper business insurance is to find and contact a reliable insurance broker. Insurance Busters (Pty) Ltd to offers this service to you, we provide you with sound, fair advice from professional, qualified consultants. Your consultant will provide you with advice on the coverage and generate quotations from the various insurers.
Q. What kind of insurance do I need?
A. There are six broad areas of exposure:
- Property
- Time Element
- Crime
- Automobile
- Liability
- Workers' Compensation
Not every business will have exposures in every area, which is why an analysis must be done. Most insurance is a business decision on your part. However, contracts you may enter into, such as leases, loans, etc., may contain, insurance requirements you have to comply with, and of which you should be aware.
What are some of the specific exposures and how are they covered?
Following is a table of common exposures and appropriate coverages:
Property
| Exposure |
Coverage |
| Buildings |
Commercial Building policy, Fire(owned) and Extended coverage minimum |
Buildings(leased):
(a) Lessee required to provide insurance.
(b) Lessee not required to provide insurance |
Same as owned building.
Same as owned building |
| Building under construction |
Builders Risk Policy
Business Personal Property Policy (includes furniture, fixtures, equipment and stock.) Fire & EC minimum |
| Tools & Equipment (used away from the premises). |
Contractors Equipment floater |
| Stock |
Usually insured as part of Business Personal Property. If values fluctuate considerably during the year, a reporting form may be appropriate. |
| Property of others in possession for storage, service, or repair |
May be covered under Business Personal Property or Special types of coverage |
| Damage to Boiler, Air conditioners, Air compressor,etc |
Boiler & Machinery coverage |
| Loss or damage to stock while being transported in an owned motor vehicle |
Motor Truck Cargo coverage |
Loss or damage to property shipped via:
(a) Common Carrier
(b) Mail
(c) Common Carrier, Overseas |
Transportation Coverage
Mail Coverage
Cargo Policy |
| Loss due to faulty discharge of water from Automatic Sprinkler system |
Usually covered by Commercial Building and Business Personal Property coverage |
Time Element
| Exposure |
Coverage |
| Loss of profits due to insured loss |
Business Income(interruption) Coverage |
| Expenses necessary to continue business operations after insured loss |
Extra Expense coverage as part of Business Income Coverage |
| Loss of rents due to building(s) not being habitable, due to insured loss |
Generally included in Business Income coverage |
Crime
| Exposure |
Coverage |
| Loss of money due to robbery, burglary, on or off premises |
Robbery & Safe Burglary coverage-Money & Securities |
Commercial Auto
| Exposure |
Coverage |
| Liability & Physical Damage exposures |
All such exposures can be dealt with by a comprehensive Commercial Auto Policy, a Truckers coverage policy or Motor Carriers policy |
Liability
| Exposure |
Coverage |
| Business operations and premises |
Comprehensive General Liability policy |
| Products manufactured, distributed, or sold |
Comprehensive General Liability policy or Products, Completed Operations Policy |
| Work performed by you under contract such as construction |
Comprehensive General Liability policy or Products, Completed Operations Policy |
| Premises owned but not occupied by owner |
Comprehensive General Liability policy |
| Liability for the contractors or subcontractors |
Comprehensive General Liability policy, or Owners and Contractors Protective Liability |
| Losses in excess of policy limits or need high limit of liability |
Umbrella Liability Policy |
In Commercial Insurance, are there policies that provide or combine the various kinds of coverage like a Homeowners policy does with personal insurance?
Yes there are various "package" policies available. Programs such as the Business Owners Policy (BOP), Special MultiPeril (SMP) and insurance company designed packages are constantly being marketed.
How much does business insurance cost?
Your cost will be unique to your exposure; that is, it will be similar risks insured by the same company, but since this is a competitive market, different companies will have different premiums. You should know the basis for the premiums. Property insurance premiums are based on a rate per R100 coverage. Factors that go into making the rate are construction of building, occupancy and use, public protection, neighboring exposures and internal protection, such as sprinklers, etc.
The premium basis for liability insurance depends on the type of business. Stores and manufacturing are based on gross sales. Contracting and service businesses are based on payroll. Apartments are based on the number of units, hotels, on gross sales, and office space and property owned and leased to others are based on square footage area.
Anything based on sales or payroll is auditable and can result in additional or return premium. Companies have minimum and deposit premium requirements, which can and do vary.
After I agree to purchase insurance, complete the applications and pay money, how do I know I have insurance?
You will be given a contract signed by the broker, showing you as the insured, effective date of coverage, the insurance company, location and description of property insured, amounts of coverage, limits of (missing info?)
How easy is it to change my insurance if Insurance Busters provide me with a better option?
It is very straight forward to change from one insurer to another. Your broker will put in a cancellation notice to your existing insurer and simultaneously arrange the new cover so that there will be no ‘break' in your cover.
Key Person Insurance Explained
Key person insurance, sometimes called key man insurance or key executive insurance, is designed to protect a business in the event of the death of an executive or key team member who makes a significant contribution towards the profitability or stability of the business
Key executive insurance, key person insurance, key man insurance -- whatever you call it, it still does the same thing.
Buying key person insurance can ensure that a business plan is carried on even if a key executive dies. Key man insurance benefits replace lost revenue or fund the search for a replacement executive.
How much does key man insurance cost? Costs range from hundreds to thousands of Rand per year. Premium costs vary, in large part, according to the covered individual's age. If the exec in question is fairly young and in good shape, costs can be fairly low.
What is key man insurance? It's essentially just a basic life insurance policy for the key person which goes to the business. Usually, they're 10- or 20-year term policies.
Venture capitalists, banks and other lenders often require key-executive insurance for the start up companies they fund. If a death occurs, the key man insurance payment typically goes to the start-up company or sometimes it goes directly to the venture capitalist. This allows the investors and creditors to protect their investment.
Even if you are not being asked to buy key man insurance by your investors, it can make sense in some cases. Think about what would happen if you or one of your business partners passed away. If the situation would be dire, it may make sense to insure against it. If it would have little effect on the business, there's no big need to buy key person insurance.
If you are buying key man insurance, make sure you work with an insurance company that has experience with key-exec insurance.
Equipment Insurance for Small Businesses
Buying business equipment insurance is a sensible investment for small business owners. If your business equipment is not adequately covered by insurance, you may be in for a nasty surprise.
If your business depends on equipment that you've leased or purchased, it's a smart move to make sure you have adequate business equipment insurance.
Damage to your machinery and equipment can result from numerous sources, including mechanical breakdown, electrical current, and arcing. Theft can also be an issue. When equipment breaks down or is stolen, it's a double whammy. You not only have the costs of repairing or replacing the equipment, you also may find that you lose business income because the equipment is not available.
As such, it pays to make sure you have the proper business equipment insurance coverage.
Companies that lease equipment are especially vulnerable. Many small business owners rely on expensive leased equipment but do not have enough leased equipment insurance to cover a total loss scenario. If underinsured, they could be facing a very expensive payment to the leasing companies. In the event of destruction of the property, many equipment leases require the lessee to replace the damaged equipment or to pay off the balance of the lease.
Imagine a scenario where you lease a R100,000 piece of equipment and it's destroyed the day after you lease it. Suddenly you've got a R100,000 liability to the leasing company, and no equipment with which to carry out your work.
Make sure your business equipment insurance covers loss of business income resulting from equipment damage. Business income coverage protects you when a covered loss interrupts your business. There are various limits depending on the coverage you need.
As with all insurance, when you purchase business equipment insurance it pays to read the fine print. One business we know had insurance coverage for fire, lightning, explosion, windstorm, hail, smoke, riot, strike, vandalism, theft (with visible signs of forced entry), flood, goods in transit cargo coverage, and malicious mischief for the full depreciable value, repair of the equipment, or payoff the lease contract, whichever is less. Sound like they were well-protected, doesn't it?
For example a business owner may find out that his business equipment insurance covered him for a broken computer, but it only covered the physical computer equipment, not damage to or loss of data. His data restoration costs were R1,500 and it all came out of his pocket, instead of being covered by insurance.
Finally, a small business owner with leased equipment found out after a loss that his business equipment insurance only covered the ACV (actual cash value) of the equipment, not the replacement costs. Usually, the ACV is much lower than the replacement costs, so if you have ACV coverage, you are probably
Don't let these insurance horror stories happen to you. Make sure you read all the fine print on your business equipment insurance policies.
It's also important to update your business equipment insurance policies over time. Each time you buy new equipment, you may have to update your insurance rider in order to make sure the equipment is covered. If you forget to make the updates, you may not be covered.
If you are concerned about whether you are adequately covered with equipment insurance, contact your insurance agent and ask for a business equipment insurance consultation. Run through a variety of scenarios with your agent, and make sure you are happy with the outcomes.
With the right business equipment insurance in place, you'll be able to rest easy and focus on growing your business.
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