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Business insurance: the difficult conversation

Article provided by Fedgroup

One conversation most new business owners try to put off for as long as possible is the inevitable one about insurance. Let’s not beat about the bush, insurance is expensive and even more so when you consider what you could achieve if you invested all that money back into the business.

And it is not only a decision about whether to get insurance or not, but also what type of insurance is appropriate for your business. However, this is a conversation that every entrepreneur should have, as unforeseen circumstances could see the entire business go under. To get this conversation going, below is a list of the main types of business insurance to consider.

Commercial insurance

At the very least, all businesses should have commercial insurance. This form of insurance operates in exactly the same way as short-term insurance such as car or household insurance, and insures the business’ property, stock, cars and other assets against damage. Most insurance companies provide one insurance package that includes commercial property insurance, commercial vehicle insurance and the like. The business owner should therefore make a list of all the company’s assets and ensure that the insurance adequately covers it all, or at the very least, those assets that the business simply cannot do without. It is also important to look at the insurance once a year to ensure that your circumstances have not changed. Industry experts often warn that commercial insurance is the form of insurance where clients are the most often either under or overinsured. It is equally important to ensure that you are not paying for add-ons you don’t need as it is to ensure that everything is covered.

Public liability insurance

Public liability insurance is another must for a business. Whenever anything associated with the business causes harm to another person, there is the possibility of a lawsuit. Even the most innocuous of businesses could find itself inadvertently part of another person’s injury. And in the litigious society we find ourselves in, the business does not even have to be responsible for the injury to be sued. A person spraining an ankle on your premises could claim that the environment was not safe enough and sue for damages. Public liability insurance also provides cover for more serious incidents such as when your driver is involved in an accident with another vehicle.

The Compensation Fund

As is the case with the general public, it is also possible that your own workers could suffer injuries while on the job. Government provides cover for such injuries through its Compensation Fund. Employers who wish to be covered by this fund can go to the website of the Department of Labour to obtain the registration form.

Professional indemnity cover

Professional indemnity cover, also known as professional liability cover, differs slightly from public liability insurance and covers any problems caused by a business not providing a service properly. Any business that provides a service can be the target of a lawsuit if clients are unhappy with the end result. This could be anything from someone not being happy with their haircut at your salon to a person suffering severe consequences from being misdiagnosed by a doctor. Consumers are becoming increasingly aware of their rights as laid out in the Consumer Protection Act and they are also increasingly suing when they believe these rights have been violated. Challenging economic conditions have also led to consumers becoming increasingly agitated when they believe they have not received value for their money. These circumstances make it very important for business owners to ensure that they are protected against lawsuits of this nature. A broker can advise whether your business requires professional indemnity cover.

Key person insurance

Although we are constantly exposed to messages telling us that all workers should be seen as equal, the truth is that people are very different in their abilities. The very existence of a company is often linked to the abilities of its top people. If these people move on or fall away unexpectedly, there could be serious consequences for the survival of the business. The bigger the company becomes, the more crucial the role of team managers becomes to ensure that everyone is pulling in the same direction to the utmost of their abilities. If you believe that you have an asset in a person that cannot be easily replaced, key person insurance is a must. The payout could help the company to recruit another top person or bridge the financial loss arising from losing their top person. If you decide that your business requires key person insurance, it is important for this insurance to be taken out by the business and not by the individual business owner, as money that is paid into a personal account from key person insurance is taxed as income.

Personal death and disability cover

Most people start a business with the vision of that business providing an income to take them to retirement in reasonable luxury. Business owners of small business are often inextricably linked to the success of the business and the operation may shut down if they are no longer there. If this is the case with you, disability or death could seriously affect your own financial prospects, as well as those of your family. Death and disability cover is vital to ensure that your income stream remains unaffected by your personal circumstances.

Fedgroup Life is a proud Partner of the NSBC.