What is business insurance?

Business insurance protects businesses from financial losses caused by customers who don’t pay, property theft or damage, liability, harm to reputation and risks affecting workers.

Some business insurance is compulsory in Singapore including some liability insurance and work injury compensation.

 

Why do I need business insurance?

Even the most successful and profitable businesses can suffer ill fortune through no fault of their own. In the worst-case scenario, a serious hit could cause an uninsured business to go under. The ‘hit’ could be a fire that destroys your manufacturing base, a costly malpractice suit, or a major customer that unexpectedly goes bankrupt causing a big hole in your balance sheet. Business insurance can help mitigate any of these examples and could help you pick up most of the pieces and carry on.

 

In some instances you need business insurance because it’s the law. In Singapore, providing work injury compensation cover for employees is compulsory, so is commercial auto insurance and, in some circumstances, third party liability insurance.

 

In addition to your legal obligations it’s a good idea to assess your business and identify the cover it needs. In most cases these comprise five areas:

  • Commercial debt
  • Liability
  • Automotive
  • Property damage or theft
  • Employee protection

 

Learn more about the types of business insurance used by small businesses.

 

How business insurance works

Step one:

Assess your business needs. Think about whether you can absorb some losses. In most cases it is best to think about this in terms of business interruption. If you can afford to replace something without it impacting on your operation, you probably don’t need to insure it. But if something is too costly to replace, or would prevent you from normal operation if you had to divert funds to replace or repair it, insurance would be a good idea. Remember to consider everything – not just equipment. A big hole in your income can be just as damaging as a big hole in an item of costly equipment. Failure to get compulsory cover can also be expensive. You may receive a fine and may experience damage to your reputation.

 

Step two:

Seek advice and shop around. Don’t be afraid to ask insurance brokers and insurance companies how they can best support your business. By the nature of their work, underwriters should be experts in your market and should understand exactly what you need and how their products can support your business. Make sure they tell you and, if they can’t, find an insurer who can. This includes a frank discussion of the small print – are there exclusions to your policy that you would rather have included?

 

Step three:

Check you’re meeting your legal obligations. Your insurance company or broker should explain what insurances are compulsory for your business and any updates to the law.

 

Step four:

Take out insurance cover and keep your relationship going. After shopping around and finding the right cover and insurer for your business the next step is to buy insurance. However, don’t just stop there. Markets evolve, laws change and your business will develop. Your insurer should be sensitive to this and keep an ongoing and open dialogue with you, suggesting changes to your level of cover as needed. If your insurer simply expects you to pay their bill without understanding your needs it’s time to ditch them for someone who makes the effort to work more closely with you.

 

Choosing the right insurance for your business

 

Size (and substance) matters. If you’re running a small retail business your insurance needs will differ from a large manufacturer. Most insurance providers will tailor different packages to suit your individual needs. At Atradius, we offer a modular approach to credit insurance, which allows us to create the exact level and type of cover you need.

We develop tailored credit insurance solutions for businesses of all sizes from SMEs to global multinationals. We insure businesses that focus on domestic trade only as well as those that export and trade internationally. Multinational corporations use our products and businesses that need to insure long term projects with non-cancellable limits.

 

Business insurance: not just about preparing for the worst

While a key aim of insurance is to offer you a safety net if things go wrong, this isn’t always the only benefit of insurance. Take trade credit insurance for example. Designed to protect your business from commercial debt caused by the failure of your customer to pay, it can also bring commercial advantage. With the security of a credit insurance policy, you can adopt a more aggressive sales strategy and benefit from the increased profits this may lead to.

 

Credit insurance can also be valuable when it comes to investing in your business. This is because investors and lenders will look upon your business more favourably as – with your accounts receivable covered by your insurer - you will carry a lower credit risk. As a result, larger loans and more attractive rates may open up for you.

Related content

Types of insurance for small business

There are many insurance policies out there for small business, some are a legal requirement and others provide vital peace of mind and can prevent a business from failing following an emergency.

What is trade credit insurance?

If your customer fails to pay, trade credit insurance safeguards your business. In many instances, credit insurers may cover up to 90% of the debt.

What is export credit insurance?

Export credit insurance operates in the same way as trade credit insurance and focuses specifically on trading relationships with customers based overseas.

Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.