By Tyrone Lowther
IF YOU run a small business, you’ll know that your circumstances can change in moments. If the past few years have left you feeling wary, you aren’t alone! Research shows that small to medium-sized business owners are feeling less confident about their ventures due to load shedding, petrol price increases, unstable economic conditions and other factors beyond their control. There’s no magical crystal ball that allows you to see the future to prepare for the unexpected, but you can take steps to minimise the impact on your business.
Here's what you need to know about business insurance and how products like Budget’s Biz Assist can help keep your small business afloat when you need it the most.
Why is insurance important for small businesses?
South Africa is a beautifully diverse country. Our small business economy reflects this, including everything from high-end clothing boutiques in Cape Town to inner-city spaza shops serving Durban's pedestrians. These businesses might seem as different as night and day, but research shows that they have one thing in common: vulnerability to crime. A government survey shows that over half of all small businesses have experienced crime, with the most common crime being burglary and robbery.
Business insurance can help your business recover financially from theft and other unexpected events, such as lawsuits or a bad investment that could potentially cripple your business. Companies with turnovers at various points on the spectrum were surveyed, revealing that some experienced losses running up to more than R100 000 a year. Because only an estimated 50% of South African companies are insured, it's easy to see why so many small businesses fail before they can succeed.
What type of business insurance do I need?
Most insurance providers customise their coverage to meet your individual needs. However, there are some standard policies available that suit a lot of different businesses. For example, professional business insurance is geared explicitly to those working in professions such as the trades, medicine or hospitality, and even professionals working from home.
Certain forms of insurance apply to most businesses, such as business interruption insurance or generalised business insurance. These are two forms of insurance meant to work in tandem to protect your business in the event of a major loss.
Generalised business insurance covers your business in the event of legal claims or unforeseen circumstances such as fire, flooding, theft, deliberate damage or storms and lightning. It covers everything you use to run your business, except your physical workspace. Should you lose anything within the four walls of your business offices or factory, generalised business insurance will cover the cost of replacing what you need to resume operating as before.
While having stolen or damaged equipment and stock replaced will save you in the long run, not being able to run your business until it's returned to you will also cost you money. This is where business interruption insurance comes in. It will cover your business for earnings lost while it is recovering, this may be by helping you honour expenses such as bills and reducing other financial losses.
What are the advantages of business insurance?
Protecting your business from financial loss is the most significant advantage of having business insurance. Alongside the economic benefits, a policy also gives you and your employees peace of mind - something you can't put a price on.
What else does business insurance cover?
You can get business insurance on business equipment, legal cover and more. Here are a few more inclusions that could be a lifesaver for your business in particular:
- Coverage for business vehicles (including motorcycles, trailers and golf carts).
- Money cover (including coverage for accounts receivable plus cash, cheques and money stored in a safe).
- Legal cover (including all risk cover; public liability cover against damage, death or injury to a third party or their belongings; employee liability cover and fidelity guarantee cover for fraud protection).
- Building coverage (for the physical structure of your business’s operating space).
- Group personal accident cover (for coverage in the event of death, disablement and medical cost claims).
- Goods in transit cover (including specific cover for courier and delivery businesses).
- Electronic goods cover (including tangible electronic equipment and intangible software or files).
- Item risk cover (coverage for items you regularly remove from your main business premises).
How much does business insurance cost in South Africa?
The reason that you started your business is that you wanted to offer the market something new. What you’re offering necessarily hasn't been done before, meaning a price for your business will be quite different to another. To preserve what makes your business unique, you should seek a tailored business insurance quote for a price that covers your individual needs.
To maximise the value of your business insurance, you can seek coverage that also comes with value-added benefits. These can take many forms, but common ones include cashback bonuses after a certain number of claim-free years, a flat excess structure to allow you to budget for claims and free insurance-related financial advice to help your business grow.
* Lowther is the Head of Budget Insurance
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