Guide to Business Insurance

South African SMEs have to prepare for risk to ensure they do not find themselves scraping around to try and save their businesses when unexpected setbacks occur. Many businesses are either intimidated by business insurance due to the idea that it’s too expensive, or they leave it to the last minute.

The majority of existing businesses in South Africa are Small, Medium and Micro Enterprises (SMMEs), and according to The Banking Association of South Africa, SMMEs are responsible for about 60% of jobs in South Africa. This amplifies the importance for businesses to prioritise business insurance in efforts to not only protect their businesses, but also the jobs they create and the economy as a whole.

In recent years, South African businesses have seen how sudden events can cause serious damage. The riots in July 2021 affected KwaZulu-Natal and Gauteng. Floods in KwaZulu-Natal and the Eastern Cape forced many businesses to close. Others barely survived.

Small and medium businesses are usually hit the hardest. Owners often struggle to keep their livelihoods going. Without insurance, years of work and money can disappear quickly.

Business insurance protects your business. It also helps if your business causes harm to someone or damages their property.

There are several types of business insurance offerings available for SMEs. There are also various business insurance providers who specialise in different insurance types. We have compiled a list of business insurance types to help you understand how they differ:

1. General Business Insurance

This one serves as a safety net for your business. It helps you tailor your cover based on what your business needs.

This form of insurance allows you to cover various aspects like your building, vehicles, office contents, and more.

Without insurance, you might have to pay out of your own pocket, which could be devastating for a small business. With general business insurance, you can focus on running your business without worrying about unexpected bills.

Businesses can choose from a variety of insurance providers. This includes big brands like OUTsurance, Nedbank Business, Auto&General, Miway, and more.

2. Commercial Property Insurance

Think about your business space, your stock, and your tools. What would happen if they were damaged or stolen? That’s where commercial property insurance comes in. In South Africa, floods in KwaZulu-Natal, strong storms in the Western Cape, and break-ins in city areas happen more often than you’d like.

If your shop, office, or warehouse is damaged, your business could suffer greatly. This insurance helps you repair or replace what’s lost so you can keep trading. Even if you run a business from home, it’s worth thinking about.

Entrepreneurs are spoilt for choice as there’s a variety of insurance providers who cover commercial property insurance. Some of them are Santam, Santam Bank, Miway, and others.

3. Workers’ Compensation

Your staff is one of your biggest assets. If someone gets hurt at work, workers’ compensation covers their medical bills and lost wages. Companies must comply with the requirements for Compensation for Occupational Injuries and Diseases (COID).

Some industries, like construction or delivery, have higher risks. In South Africa, certain businesses are required by law to have this coverage. Rand Mutual Assurance is one of the main insurance providers that covers injury and duty claims.

4. Product Liability Insurance

If you sell products, this one is critical. It protects you if a product causes harm or damage. Imagine selling a small appliance that causes burns or a cosmetic product that triggers an allergic reaction.

Legal bills and compensation can be huge, and it could hurt your reputation. Product liability insurance helps cover these costs and keeps your business running.

Businesses looking for product liability insurance providers can have a look at OUTsurance’s insurance offerings.

5. Cyber Liability Insurance

The reality of digitisation and the pressure of future-proofing your business have led to digital implementation across businesses. Cyber liability insurance helps if you face hacking, data breaches, or online fraud.

A single cyberattack could mean lost client information, legal costs, and a damaged reputation. This insurance helps you cover recovery costs, inform clients, and get your systems back online quickly. It’s basically a shield against digital disasters.

Insurance providers like AIG and Santam offer cyber insurance to help protect you against cyber risk.

6. Business Interruption Insurance

Business interruption insurance is helpful for those unexpected instances when you have to pause operations. Fires, floods, or broken equipment can disrupt your business’s operations.

Business interruption insurance covers lost income during these times. It also helps with rent, salaries, and other bills, so you can focus on fixing the problem. In South Africa, businesses face unfortunate issues such as power cuts or even local unrest that can interrupt trade.

For business interruption insurance, businesses can contact Santam for a quote.

7. Fidelity Insurance

Fidelity insurance protects you from dishonest employees. It covers theft, fraud, or misuse of money.

Even one dishonest staff member can cause big losses. This insurance gives you peace of mind while you still trust your team. It’s crucial to note that in order to claim from this cover, the loss your business has suffered must be reported to the police and a successful charge must be filed against the employee.

Compendium Insurance Brokers offers fidelity insurance for businesses looking to protect themselves from employees who put their company at risk.

8. Directors and Officers Insurance

If you run a company, directors and officers insurance protects you if someone sues you over decisions made for the business.

As your business grows, investors and shareholders might question your decisions. This insurance covers legal fees and damages. It also reassures investors that your leadership is secure.

If you’re looking for a directors’ and officers insurance provider, you can have a look at AIG South Africa.

When you choose business insurance, you must evaluate your business and look at what the non-negotiables are in terms of insurance coverage. For instance, if your business deals with a lot of sensitive data of your customers or clients, cyber liability insurance is non-negotiable.

Running a business can be exciting, but it also comes with risks. Some risks are small, like a broken window or stolen stock. Others are much bigger, like a fire or flood that destroys equipment or stock. Certain types of insurance are essential for all businesses.

Insurance protects your business from serious financial loss. No matter how small or new your business is, these types of insurance should be considered non-negotiable:

General Liability Insurance

General liability insurance is the basis of business protection. It covers situations where someone is hurt or property is damaged because of your business.

For example, a client could slip into your shop. Or a delivery driver might damage a neighbour’s fence. Without insurance, you would have to pay for these costs yourself. That could wipe out months of hard-earned profit.

General liability insurance lets you run your business with confidence. It is especially important for businesses that meet clients, work with suppliers, or welcome the public into their space.

Commercial Property Insurance

Commercial property insurance protects your business space, your tools, and your stock if they are damaged, destroyed, or stolen.

South African businesses face many risks. Floods in KwaZulu-Natal, storms in the Western Cape, fires in dry areas, and theft in cities all happen. Losing your shop, office, or warehouse can stop your business immediately.

Even home-based businesses can benefit if they have tools, equipment, or stock that would cost a lot to replace. Property insurance helps your business recover quickly after a loss.

Workers’ Compensation

If you have employees, workers’ compensation is important. It pays for medical costs and lost wages if a worker is hurt at work.

Jobs like construction, delivery, or factory work are higher risk. But accidents can happen anywhere. In South Africa, some businesses must have this insurance by law.

Even when it is not required, it shows your team that you care about their safety. That trust can make employees more loyal and committed.

Business Interruption Insurance

Business interruption insurance covers lost income if your business cannot operate because of fire, flood, or broken equipment.

Many South African businesses face unexpected events. Floods, storms, power cuts, or local unrest can stop business. Without insurance, rent, salaries, and bills still need to be paid. Business interruption insurance gives you support while you restore operations.

You can focus on getting back to work instead of worrying about money. It is not required by law, but it is highly recommended for businesses that need a steady income.

These insurance types are essential as some risks are not worth taking. The above protects businesses against the most common and costly risks. This includes legal claims, property loss, employee injuries, and lost income. Without insurance, even a small accident or disaster can have serious consequences. This is especially true for new or small businesses.