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.
Legal compliance aside, the area of insurance that offers the greatest lifeline to small business is credit insurance. The global downturn saw an unprecedented number of businesses fail. For many this was collateral damage, taken down by the failings of another business, whose own insolvency led to bad debt and failure to pay overdue invoices. Businesses of all sizes from large corporates to small SMEs, regardless of whether they trade internationally or domestically, can benefit from credit insurance. However, it can be argued that credit insurance is more important for small businesses because they can be more vulnerable to the bankruptcy of customers.
Small business insurance
Small business insurance includes cover for:
- Accounts receivable
- Commercial vehicles
- Property damage or theft
- Employee protection
- Business interruption
Your accounts receivable includes the value of products or services you have sold but have not yet received payment for. You can insure this and protect your cash flow with trade credit insurance. Many businesses also use credit insurance to help them secure finance, attract new customers with favourable credit terms and minimise risk when entering new markets. At Atradius Hong Kong we provide tailored credit insurance solutions for businesses of all sizes from SMEs to global multinationals. We support businesses that trade domestically and internationally, as well as organisations that need to insure long-term projects with non-cancellable limits.
Learn more about Atradius Hong Kong credit insurance.
Liability insurance can refer to public liability, management liability or product liability. This insurance protects your business from being sued if your organisation causes harm to another person or business. Professional indemnity covers disputes such as breach of contract or professional malpractice. In Hong Kong, it is compulsory for some businesses to take out liability or professional indemnity insurance.
As with private car ownership, commercial vehicle insurance is compulsory. Private car insurance is not acceptable for business vehicles that have to be covered by a specialist policy. This insurance usually covers loss or damage to the vehicle due to accidental collision, legal fees and third party injury or damage. Many commercial vehicle insurers have special packages to cover specialist vehicles and multi-vehicle fleets.
Property damage or theft
Buildings and contents insurance usually covers damage and theft to business property or products. Depending on the policy it could also protect businesses from the risks of fire, riots, storms and subsidence. Buildings and contents insurance usually covers the cost of repairing or rebuilding business premises and replacing equipment and stock. Your insurer will work with you to organise cover for specialist tools, equipment or machinery.
The Employees’ Compensation Ordinance directs employers to compensate employees for work-related injuries and occupational illness or disease. It applies to any employee regardless of salary level, including apprentices. In addition, employees who suffer injury at work can sue their employer outside of the Employees’ Compensation Ordinance. Employee Protection insurance will help mitigate the costs of such compensation. In addition, many insurance firms offer health insurance as part of employee benefits schemes.
Mitigating the cost of refurbishment following a fire, or reimbursement for the loss of products may not be enough to stop your business from going under if you are forced to cease trading for a period of time. Business interruption insurance will cover you for losses incurred to your income while you are unable to trade. It is often sold as an optional extra in buildings and contents insurance. We at Atradius also act quickly to compensate for unpaid invoices, in recognition that maintaining cash flow can be vital for small businesses.