Insurance for Business

What is insurance for business?

Business insurance refers to insurance coverage intended for purchase for commercial entities rather than individuals.
Businesses seek insurance to protect from financial losses that may occur during the normal course of doing business.

Why should I insure my business?

Businesses face different risks every day. Risks such as accidents, theft, loss of income, professional errors, lawsuits, employee injuries or illnesses, property damage due to fire, floods, or vandalism are a reality.
Business insurance does not stop bad things from happening. The purpose of insurance is to help protect your business from financial loss caused by such risks. Without insurance, you will pay for the costs out of pocket.

What to consider before insuring your business

Small business owners need to carefully consider and evaluate their business insurance needs because they have more personal financial exposure in the event of business loss.
Below are some key considerations.

  • Understand the risks your business is faced with. The risks your business faces are determined by the industry you operate in for example a manufacturing and a consulting business face different risks. The location of your business, some areas are more prone to theft, vandalism, floods, or fires. The size of the business and the number of employees also determine the type of risks a business faces.
  • Understand and what your industry insurance obligations are. Some industries have a legal obligation to insure some aspects of their business. For example, lawyers and doctors are required by law to have professional indemnity insurance. Building contractors are required to have Contractors All Risk insurance.
  • Seek professional guidance. If you do not feel like you have the ability to assess business risk to determine what kind of insurance you require, consult with an insurer, agent or broker. Be sure that these professionals are licensed by the Insurance Regulatory Authority ( www.ira.go.ke )
  • Get several proposals or quotations from various insurance companies to ensure you get the right fit for your business needs.
  • Read your business insurance policy. Ensure you clearly understand what is covered, not covered as well as the terms and conditions of coverage. Avoid the temptation of auto-renewal when the time comes. Businesses’ processes, people, assets, products change over time, industries change all these factors should be factored into your insurance to ensure adequate cover at all times. No one knows your business better than you so make it your business to ensure proper coverage.
  • Cost vs Coverage. Your business needs the best possible insurance cover, but can your business afford it? Consider, and negotiate for, flexible policy terms and any available discounts that could save you some money. You need to strike a balance between cost and insurance coverage. Be careful not to take an inferior policy with poor coverage that will not cover you in case an insured risk occurs.

What insurance covers exist for my type of business?

There are different types of business insurance based on size, location, industry, number of employees and others. Overall, insurance covers the following main areas;

  • Liabilities– this is coverage against claims resulting from injuries and damage to other people or property. For example, a customer gets injured or sick from using products from your business and they sue the business. In this case, product liability insurance will cover for legal costs and payouts if the insured party (your business) is found legally liable.
  • Employees – If your business has employees, then you are required by law to have XXX. This insurance gives your employees xxx. This provides you with peace of mind…relived you of the burden of xxx
  • Property– Businesses have property in various forms. For example, motor vehicles, furniture, buildings, machinery and equipment, stock e.t.c. Insuring business property is important as it is expensive to replace when damaged or stolen making it difficult for your business to recover.
  • Risk Management – Once you have identified the risks your business is faced with, the next step is to try and manage them. Some risks are difficult to manage but some can be managed by taking certain steps. For example, the risk of theft can be managed by installing CCTV cameras and security alarms. The risk of fire can be managed by installing smoke detectors and fire sprinklers can drastically reduce the level of fire risks. Good risk management reduces the cost of insurance.

What are the benefits of insuring your business?

Reduce business uncertainty– Taking out business insurance makes you realise the risks your business faces. Part of getting your business insured requires you to manage these risks. This ensures that you as a business owner plan for such uncertainties and this brings about clarity in how the business continues even in the face of some risks. For example, should your machines get damaged in a fire or are stolen, with insurance, you can plan for resumption of business since your machines will be repaired or replaced. Without insurance and alternative cash flow to repair or replace the machines, reopening the business becomes more difficult.

Access to credit – Insured businesses have a better chance at accessing credit facilities compared to uninsured businesses. Insured businesses can obtain a loan by pledging their insurance policy as collateral for the loan. Insurance companies can also offer loan facilities especially to their clients with life insurance.

Attract skilled and qualified employees– A business that provides insurance covers for its employees is more likely to attract and retain skilled employees compared to one that does not. Businesses that are heavily reliant on human capital should consider providing insurance covers such as medical, life insurance, Group personal accident insurance, and pensions as part of their employee benefits package. This makes your business an attractive employer and you are able to retain staff.

Increases your business’ credibility– If your clients or customers know your business is insured, it gives peace of mind and increases your credibility score. Business insurance can help you in contract negotiations and in some instances, some contracts will require you to have business insurance for work to begin.

Risk management– Insurance cannot cover everything. There are some risk elements of your business that you need to manage on your own. For example, drafting clear contracts between you and clients will to reduce disagreements and chances of lawsuits. Training employees on workplace safety will reduce accidents and therefore reduce claims. In the end, managing risks reduces exposure and also saves you money when paying insurance premiums.

Can I combine different business insurance coverage in one policy?

Yes. Insurance companies offer combined business insurance covers. These covers vary from one company to another and they vary from one business to another. Combined insurance covers make it easier to manage and save on costs. It is therefore important to get several quotes and proposals to help you identify the best value for your money.

What is the average cost of insuring my business?

Each business is unique. There is therefore no fixed cost for insuring your business. An insurance company will consider several things when calculating the premium you will pay for your business insurance. These considerations include;

  • Type of business
  • Age of business
  • Financial characteristics of the business- size, sales value, assets
  • Prior financial behaviour – credit ranking, loan repayments history
  • Prior insurance claims
  • Number of employees
  • Geographical location
  • Loss prevention or risk management practices
  • Safety/security systems

Here are some of the covers provided to businesses;

Professional Indemnity Insurance

Professional liability insurance protects professionals and consultants against negligence claims that result from mistakes or failure to perform. Professionals such as doctors, media and PR consultants, Architects, quantity surveyors, lawyers, accountants, engineers, property valuers, event planners and others can be covered under professional indemnity.

There is no one-size-fits-all professional indemnity coverage. Each industry has its own unique concerns that are addressed in the cover.

Business Property Insurance

Protecting business assets is critical for the continuity of any business should an unplanned event occur.

Business property can be protected against fire, flooding and theft.

Any vehicles used for business should also be fully insured. At the very least, businesses should insure against third-party injury, but comprehensive insurance will cover the vehicle in an accident, as well. If employees are using their own cars for business, their own personal insurance will cover them in the event of an accident.

Business Interruption Insurance

This type of insurance is especially applicable to companies that require a physical premises to do business, such as shops, garages, factories, hotel etc. Business interruption insurance compensates a business for lost income during events such as fire, floods, and others that cause a disruption to the normal course of business.

Product Liability Insurance

If your business manufactures products for sale, product liability insurance is critical. Any business can find itself named in a lawsuit due to damages caused by its products. Product liability insurance protects a business in such cases.

Public Liability Insurance

If your business has a physical location where customers can visit and suppliers deliver items, then public liability insurance is important. Simple accidents like liquid spilling over a client’s computer or a wet floor causing the supplier or customer to fall and injure him/herself could dent a business financially if not insured.

Public liability insurance will cover the costs of lawsuits due to accidents, injuries and claims of negligence by third parties.

Fidelity Guarantee Insurance

Fidelity Guarantee insurance covers an employer against loss of money, business equipment, securities or other goods belonging to the business resulting from an act of fraud or dishonesty by employees for improper personal financial gain in the course of their duties. This would be valuable to businesses such as retail chain store or those that deal with lots of cash transactions.

Goods in Transit (GIT) Insurance

Does your business involve moving goods from one point to another?  Goods in Transit insurance covers loss or damage to goods or merchandise while moving it from one place to another.