It pays to be insured

What is the right insurance for your small business?

You can’t have a business without insurance. The two go hand in hand. But finding the right insurance for your small business takes time, patience and careful research.

Insurance keeps your business going in times of crisis, but it also comes with a price.

There is no doubt that you need to be covered for those unpleasant surprises that crop up from time to time – always when you least expect them - but with all the options out there, how do you choose the right business insurance?

You can’t have a business without insurance. The two go hand in hand. But finding the right insurance for your small business takes time, patience and careful research.

Following these steps could throw valuable light on the matter:

Find out what's out there. Insurance companies offer all kinds of business cover, and wading through all the policies and options can be confusing. Basically, business insurance should cover you against these categories of risk:

  • Property
  • Crime
  • Time
  • Vehicles
  • Worker's Compensation

Property insurance covers your business against damage to its office premises, warehouses, or factories. It also covers damage to machinery and office equipment – this type of damage can be expensive, making property insurance non-negotiable for most companies.

Crime is an unfortunate reality in most countries, and South Africa is no exception. Break-ins and robberies at commercial premises and hijackings of company vehicles are unpleasant events that can cost your business, unless you're insured.

You may wonder why we have included “Time”, but this is a very real risk factor for any business. If your business suffers damage, theft, or other such negative events, you may be forced to stop trading for a while until everything is back to normal. The time element insurance covers you for lost income during this period.

Vehicles that belong to your business should be insured just like your personal vehicle. The cost of repair or replacement could cripple your cash flow unless you're covered.

Worker's compensation and other legal settlements could cost your business thousands at a time when you can't afford it. Many insurers offer legal cover that protects your company from legal action taken by customers or former employees.

Once you've explored the different types of insurance options out there, sit down with your insurance broker or financial planner and try to find the most cost-effective way of insuring your business. Remember to only cover yourself for risks that your business actually faces, but don't go without insurance altogether – you never know when you'll need it.

Eric Parker, in his book Eric Parker’s Road Map to Business Success also strongly recommends appointing a reputable insurance broker as a first step in insuring your business. The reasons he gives for this are as follows:

A broker who has several clients within a specific industry sector is well aware of the particular risks this sector poses.

Having access to the product ranges of several insurers, brokers are in a better position to provide the most appropriate cover overall.
By building a long-term partnership with one broker, you reduce the dual risks of excessive cover and/or duplication of cover, as often happens if you purchase insurance cover piecemeal, and from different sources.

Dealing with one firm makes it easy to set up a monthly payment plan that covers all your insurance needs and helps you to keep control over insurance spending. It also simplifies the handling of queries and the claims procedure.

Clint Harker of Pinion Insurance Brokers offers the following key tips for small business owners looking to bring down their insurance costs:

Conduct an annual review. It’s vital to keep up to date with what you’re covered for and how much you’re paying for it. There may be unnecessary insurance that you’re paying for and that you can remove; or you may be over-paying for vehicle insurance because you have not adjusted for its depreciated value.

Take small steps to reduce risk. Carrying out simple tasks like regular maintenance of equipment, or improving security systems, can help to reduce your costs. Indicating all the risk reduction measures that you’ve implemented will show the insurance company that you are serious about your business and this will assist you when negotiating a preferential premium. You should also ask them what they consider to be the main insurance risks for your business.

Find out about business packages. A combined package that offers a range of cover, such as property, liability and business interruption, may be an affordable alternative. Some professional associations are also able to negotiate competitive group insurance rates for members.

The bottom line, though, is that, as a small business owner, you need insurance. Look around, do your research, talk to an expert and choose widely.