What is Business Insurance and How is That Different From Personal Insurance?
Put simply, business insurance insures business property whereas personal insurance insures the personal property.
There are about as many types of insurance for businesses as there are types of business. While every business is unique, there are 7 types of business insurance coverage you need to protect the business that you’ve built:
1. Commercial Property Insurance
2. General Liability Insurance
3. Professional Indemnity Insurance
4. Cyber Insurance
5. Business Interruption Insurance
6. Group Benefits Insurance
7. Employee Compensation Insurance
Commercial Property Insurance
It doesn’t matter if you lease the space you work in or if you own the building, if your business owns the property, you need some level of Commercial Property Insurance.
There are a wide variety of specialised property policies that insure all types of property from the laptops your sales reps take off-site to the heavy-duty machinery you use onsite to manufacture your products. But the most basic Commercial Property Insurance policies insure 3 types of commercial property:
Building: including permanently attached fixtures, fixed structures on premises, etc.
Equipment: includes all contents usual to the business (ie. office furniture or computers) and tenant improvements
Stock: includes all merchandise usually sold by your type of business
Commercial General Liability Insurance
Throughout your daily business operations, you expose yourself to different risks. Whether it’s customers injuring themselves in your store or your employees damaging customer property while doing an install at their home, these are all things people can sue you for. Therefore in today’s litigious society, it’s very important to have proper business liability insurance coverage.
There are many specialized liability policies that exist depending on your specific business needs but the most basic is a Commercial General Liability (CGL) policy. This policy insures you against lawsuits brought on by 3rd parties seeking compensation for alleged bodily injury or property damage caused by things like:
Premises Liability: this refers to liability arising out of the condition of your premises such as if a poorly maintained overhanging sign on your building falls down and injures a pedestrian or if someone slips and falls in your store.
Operations Liability: this refers to liability for bodily injury or property damage that might occur in the normal operation of your business. A common example is if your employees scratch a customer’s furniture while performing an installation at their home.
Completed Operations Liability: this refers to liability incurred after your work has been completed and put to use. One example of this is if the wiring job you performed short circuits and burns the building down when the customer turns on the lights for the first time.
Product Liability: similar to Completed Operations Liability, this protects you against claims that a product you manufactured, assembled, sold, or distributed caused bodily injury or property damage when used.
On top of these coverage categories, a CGL will also cover supplementary payments and the cost to defend against insured claims in court. This means if you’re sued, the insurer will hire lawyers, expert witnesses, pay bonds, and pick up the tab for the whole thing!
Professional Liability / Professional Indemnity Insurance
A “professional” is defined as anyone with specialized knowledge or training and that clients depend on for sound advice or proper service. Some common examples of professionals would be doctors, dentists, insurance brokers, realtors, engineers, recruiters, etc. By law, professionals are required to properly render their professional services or risk lawsuits from customers alleging bodily injury, financial loss, or property damage.
If you’re in the business of providing professional services, you would need to purchase Professional Liability Insurance to protect yourself and to ensure that there is a source of compensation for your clients. For this reason, many regulatory bodies actually require that their professionals carry some form of Professional Liability insurance as a condition of their license.
Almost everyone now does business online - while this brings efficiencies, cost savings, and other important benefits, there are also downsides. With nearly every business now fully transitioned to digital, businesses are becoming big targets for cyber criminals trying to get access to your data and more importantly, your customer’s data.
A comprehensive cyber liability and data protection policy will provide you the financial resources you need to deal with a data breach and the loss of sensitive information. Cyber insurance policies offer 3 important coverages:
3rd Party Claims: this protects you against liability claims brought on by 3rd parties for failing to keep their sensitive data secure. This insurance will pay compensation to the victims, investigative costs, legal costs, and even government fines or penalties.
First Party Coverage: this section protects you against costs your business incurs in responding to breaches such as PR, ransomware payments, or investigative costs.
Business Interruption: if a hacking attack interrupts your business, you can be reimbursed for lost profits and additional expenses required to get your business back up and running after an attack.
Business Interruption Insurance
If you carry a Commercial Property insurance policy, you would already have coverage for buildings, equipment, and stock that is lost or damaged. But a loss usually also involves a disruption of your business. How long would it take to rebuild your store following a fire or to repair that critical piece of production machinery that was damaged? For many small businesses, the loss of income during this period can be difficult - or even impossible - to recover from.
That’s why prudent business owners should consider Business Interruption insurance as part of their risk management and business continuity strategy. A Business Interruption is a type of business insurance that covers 3 main things:
Lost Net Income that the business would have earned had the loss not occurred.
Continuing Expenses that the business still has to pay during the period of interruption (ie. taxes or loan repayments).
Extra Expenses required to limit the loss and get back into business sooner (ie. paying for expedited delivery or overtime pay to workers).
If you run a business that can be interrupted by the loss of physical property, you should consider investing in a Business Interruption policy.
Group Benefits / Employee Benefits Insurance
If I asked you what your company’s most valuable asset was, what would you say? Is it your buildings, your intellectual property, or maybe its your brand/reputation? If you answered any of those, I’d say you’re probably wrong. For any business, the most important asset is its people - the ones responsible for running your machines, creating your intellectual property, and displaying your brand values to customers. And as with any important asset, it makes sense to protect them.
Studies have shown that employees with access to great health care benefits are more loyal, more productive, and less likely to leave for a bigger paycheque. A properly constructed Group Health Insurance package can help you protect the health of your employees and your business by offering 3 important coverages:
Inpatient Coverage: this pays expenses for medical services taken in a hospital setting such as surgeries, IV antibiotics, drugs taken at the hospital, etc.
Outpatient Coverage: this pays for expenses for medical services that don’t require a hospital stay such as regular doctor’s visits, alternative therapies, outpatient surgeries, etc.
Maternity Coverage: this pays for pregnancy-related expenses such as pre and post-natal treatments, delivery expenses, etc.
Employees’ Compensation Insurance
And last but not least, the next type of business insurance all business owners should be familiar with is Employees’ Compensation insurance as it is required by law for all employers in Hong Kong. Failure to comply with this legislation can lead to severe financial penalties and even possible jail time.
Generally speaking, employers are liable for employees that become ill or injured on the job. To help pay for these expenses, employers would need to purchase Employees’ Compensation insurance.
The minimum limit for business with less than 200 employees (including part-time or seasonal workers, domestic helpers, apprentices, etc.) is HK$100 million. For businesses with more than 200 employees must purchase a minimum limit of HK$200 million.
What Types of Business Insurance Coverage Do You Need?
There’s a lot more to it than what you’ve read and every business is unique so you should always speak with a skilled risk manager. To find out what type of insurance is best for your unique business needs, contact a licensed Trusted Union advisor about our business insurance services.