How to get the best insurance policy for your small business. Small business insurance helps to protect your small business from financial risks. Insuring your business investments is very important for peace of mind.
When you insure your business investment, you are protected from unexpected events that can lead to small business failure.
Think about it, what if you fall sick or can’t work for months?
The Covid-19 pandemic should be a good learning point for us all. Especially, for those who feel insurance is unnecessary.
It is better to protect yourself while at the same time, minimize your insurance costs where possible. After all, prevention is better than cure.
How to choose the best insurance coverage for your small business
In order to choose the best insurance coverage for your small business. You need to understand the various insurance policy types available.
Also, you need to anticipate the type of risks your business could face. Therefore, with the help of your insurance company or broker (registered professional that advise and arrange insurance cover), you’ll then be able to decide on the plan that matches your business needs.
The aim of this article is to provide information that can help you choose the best insurance products for your small business.
The article tells you about the types of insurance policies available for small businesses in Nigeria.
In addition, it highlights different areas of business that you might consider getting an insurance cover for.
Also, the article presents tips about choosing the right insurance cover, insurance company or insurance broker for your business.
Types of small business insurance policies
Professional Liability Insurance
This type of insurance policy protects a professional business owner from claims or legal liabilities from their clients.
For example, claims or liabilities as a result of error, negligence or omission during the course of carrying out your professional duties.
It is a legal requirement in Nigeria, for healthcare professional practitioners to have a Healthcare Professional Indemnity Insurance Policy.
Therefore, this type of insurance is useful if your small business involves selling professional skills or knowledge.
For example if you run your small business as a:
- Recruitment consultant
- IT consultant
- Web designer
Having a professional liability insurance cover protects you against damages claims brought by a client in a court of law within Nigeria.
The policy tends to cover:
- Financial loss
- Legal costs
- Negligence or breach of duty or care
Business Interruption Policy
A Business Interruption Policy protects your small business against loss of income due to a disaster.
It is also called a Business Income Policy. In the event of a loss or damage, this type of policy provides your small business with a comprehensive cover.
Business Interruption Policy covers events such as fire, accident or public policy measures.
Some small businesses with this policy may be able to recover from the Coronavirus lockdown losses with the settlement of their claims.
However, this type of policy is not common among small businesses in Nigeria. Although manufacturing businesses (a major economic sector with 23.4% of SMEs in Nigeria) tend to have this type of insurance policy in case of fire outbreaks.
For example, the Business Interruption Policy of Old Mutual Insurance Company covers events such as loss or damage to business property as a direct result of fire outbreak, lightning or explosion.
It also covers loss due to theft or attempted theft. Generally, such a policy would cover assets such as:
- Office buildings
- Office contents
- Plant and machinery
- Stocks – raw material and/or finished goods
Business Property Insurance
The Business Property Insurance covers all risks of theft, loss and accidental damage to the business property you insured.
However, this depends on the terms and conditions of your policy.
Combined All Risks Insurance Brokers (CARIB) Nigeria Ltd offers this policy.
According to the company, your business will be covered by payment, repair or reinstatement. Depending on the damage sustained.
Workers Compensation Insurance
The Workers Compensation Insurance helps you to provide compensation to your employees.
There might be a need to compensate employees in the event of bodily injury or death as a result of accident or disease in the course of employment.
Sterling Assurance provides this policy benefit per employee (casual workers) at the rate of 0.345% plus 15% for medical expense.
It also covers benefits such as:
- Death benefit – 42 months earnings
- Permanent total disability – 54 months earnings
- Medical expenses – unlimited but reasonable
What type of small business insurance policy should I have?
Although we have mentioned four types in this article, there are different types of insurance policies available to small businesses in Nigeria.
In addition, the insurance industry is very dynamic. Therefore, it is constantly evolving and new policies are being developed.
In order to select the one that suits your business and personal requirements, you should consider the following areas as a guide.
These areas should be considered when discussing with a broker about the best policy cover for your small business.
Small business areas to cover by an insurance policy
Here are the main areas you should consider to insure your small business.
- Damage to equipment e.g. computers.
- CEO or key person insurance. This is important in the event of death or disability.
- Loss of income as a result of health problems.
- Professional indemnity for professional small business owners.
- Injury to customers as a result of using your products.
- Injuries to people who visit your place of business.
- Protection from natural disasters such as floods or fire outbreaks.
- Injury to employees on the job.
- Damages done to or caused by your business vehicle.
How do I get insurance policy for my small business?
Get a reliable insurance company/broker
Using an insurance broker helps you to navigate the great deal of technical wording involved.
A good starting point would be to ask for recommendations from business associates, family or friends.
You can also check insurance company websites to read their client testimonials.
Avoid any company that hides such information. It is critical to ensure that you have been sold a good policy by a reputable company. Client testimonials can be of help in that regard.
Otherwise, you may not be able to make your claim when the time comes.
Insurance is a risky business. Insurance companies would not want to pay a claim if they can avoid it.
Understand the requirements and schedule
Ensure you qualify for the cover and that you stay qualified.
Don’t lie about your situation.
Always inform your insurers about changes that might affect your policy. Not doing so could render your claim void.
Also, understand the policy schedule. Keep your end of the bargain by ensuring you meet the premium payments (monthly or quarterly payments made by the insured) as at when due.
Keep yourself informed
Ensure your budget for insurance is adequate to cover as many possibilities as you can.
In addition, stay abreast of changes to the insurance products available.
Also, ensure that the policy you have suits your requirements perfectly.
Read the fine prints
An insurance policy is a legally binding contract. Make sure you fully understand the grey areas.
Do this by reading through and understanding the terms and conditions.
If in doubt, get professional advise of a lawyer to ensure you’re adequately covered.
How much should I spend on insurance for my small business?
Spend as much as you can afford. Although many people see insurance as a luxury, because you do not see any monetary benefit to your business on a day-to-day basis.
However, an insurance policy would help you sleep at night. An insurance policy would give your business security.
When your business or income is adversely affected, the small amounts you have been paying as premium may make a significant difference.