Whether you’re considering starting a small business, or perhaps you already have one, the importance of being properly insured should be of vital concern to you..
Properly insure your business and you have removed one of the often unforeseen risks that could cause great harm to your business and set you back financially, even perhaps putting you out of business.
No matter what the nature of your small business is, there are both foreseeable and unforeseeable liabilities you need to worry about.
No matter the nature of your small business, whether you provide consulting, repair cars, or style hair and irrespective of whether you work in your home, or if you work in a brick-and-mortar location, insurance is still a necessity to protect you and your business from risks and liabilities.
There are a number of types of policy available, each of which serves to protect your business from a specific set of liabilities.
Not all types will be applicable or necessary for your unique situation.
A good rule of thumb is to, at the very least, have a Public Liability and Professional Liability policy in place, as well as Property Insurance if your business has a physical presence.
Let’s break down the different types of insurance available below so you can learn more about they are and why they are important:
- Public Liability – This type of insurance covers bodily injury and property damage. If a customer has an accident in your clinic, office or store, this would fall under Public Liability. In short, this policy would provide for both damages and defense (if necessary) in the case that your products/services or employees cause (or are alleged to have caused) property damage or bodily injury or harm to any other third party such as a client or customer.
- Professional Liability – Also known as E&O or Errors and Omissions insurance. If there is a claim against a service or product that you provided, these items would usually be covered under professional liability insurance. If an employee makes a clerical order or a service does not deliver on its promises, this policy would provide coverage for associated damages and defense.
- Property Insurance – Do you or your business own, lease or rent property? Does your business use office or other equipment such as computers, tools, or inventory of any kind? If so, you may want to consider purchasing a policy that would provide for protection in the event of vandalism, theft, fire, or other damages.
- Employees’ Compensation – As much as we try to keep our employees safe, accidents can happen. In Hong Kong, it is a legal requirement for all employers of casual, part time or full time staff. to have Employee’s Compensation Insurance. This insurance will protect the business against claims under the Employees Compensation Ordinance (a 'no fault' insurance where there is a list of standard awards). You will also be protected against claims at common law, should it be apparent that an injury or sickness has befallen the staff on account of your negligence. For short term problems there is a wage replacement mechanism for paying the staff while they are recovering. Penalties for non-compliance are stiff, with compulsory jail time if found guilty..
- Commercial Motor – Commercial motor insurance covers any accidents that happen when work cars or trucks are being driven, as well as injuries that may result from these accidents. Typically this is ideal for those businesses that have to transport products to the end client or that have on-site or offsite use of vehicles for various uses.
- Business Income or office overheads – There are different options available, normally as a part of an office, shop or business package, whereby you can cover overheads or profit if say a fire or flood means your business has to shut down for a short period of time.
- Cyber Insurance – With the prevalence of cyber-attacks and data breaches on the rise, SMBs would be wise to look into this type of insurance to cover damages, legal fees, notification fees, and other liabilities as a result of a cyber attack or breach. Research has shown that over 40% of all cyber attacks were carried out on SMBs (small businesses) and that after a breach nearly 60% of all small businesses had to shut their doors within 6-months (largely due to liabilities and associated expenses).
- Directors and Officers Insurance – This type of insurance is meant to protect the officers and/or directors of a small business in the event that their direct or indirect actions result in the company losing money or causing other damages.
- Term Life Insurance For those companies that rely heavily on one or more members (such as a single owner business or two member partnership), an individual life insurance policy where the beneficiary is the business, can help keep the business afloat in the unfortunate case that a vital contributing member dies or becomes disabled unexpectedly. There is also the option to insure all the staff in the company with a group life plan that will pay out either a lump sum, say USD100,000 of some multiple of annual salary, normally four to six times annual salary. Depending on the number of employees, the reference to 'life' here, also includes the option of personal accident, critical illness and disability insurance.
- Medical Insurance. This is not a requirement in Hong Kong, but it is normal market practice to provide staff some level of private medical insurance. Some insurers will allow a group plan to start with just one staff, but most need a minimum of 3-5 staff. If you are looking for staff (and their dependents) to be guaranteed acceptance by the insurer, you normally need at least 5-10 staff in order to have 'medical history disregarded'.
- Mandatory Provident Fund - MPF. It is another legal requirement that employers help fund for an employee's retirement. It matters not at all how many hours the staff works for you, you have obligations to meet in this area and again, if you seek to avoid these responsibilities there are penalties that involve compulsory jail time.
Do drop us a line at 'firstname.lastname@example.org' or call Robin Brown, or Romi Gill on +852 2530 2530