In January 2015, looting of mostly foreign business owners’ businesses in Soweto and surrounding areas dominated news reports. Speculation about the possible motives behind this was rife and many foreign business owners that were victims of the looting were very emotional when they told news reporters that they had lost everything. On a completely different note, this event highlights the risks associated with doing business in a dynamic country such as South Africa, and the role of business insurance in protecting a business owner from a number of risks that he and his business face in the case of an unexpected event…
It is commonly accepted that ‘life is what happens when you are making other plans’. This is also true of business insurance. While we might argue that Africa is a stable continent that is unlikely to be hit by an earthquake, that the likelihood of an aeroplane damaging a building is small, both such events (and others) have happened in South Africa. If these businesses or individuals were not insured against such unexpected events, they would have been in a precarious position. It is therefore wise for any business and business owner to, as part of a strategy for risk management, take out insurance (including business insurance) to protect him/her and his/her company from the risk of loss during an unexpected or unplanned event.
If you are a business owner, before deciding on the type of business insurance you need to protect you and your business, do some research. Most of the major companies in South Africa, such as Santam, Momentum, Outsurance, Mutual and Federal and Discovery Life, provide business insurance products across a wide spectrum. Some of these are tailored for the small, medium and micro-enterprise sector, but some cater for all business sectors. Banks, such as Standard Bank and FNB, also have insurance offerings that you might want to have a look at. Once you have researched the offerings available and have an idea on what type of business insurance you are interested in, make use of a price comparison Website or mobile app to compare the cost of these offerings, but in doing so, make sure that you compare apples with apples.
The content of this article is in no way meant as financial advice. It is aimed at giving the business owner a bird’s eye view of the type of business insurance products that are available today. When it comes to an important matter such as insurance, including business insurance, the expert advice of a qualified financial adviser is indispensable not only to ensure that you are adequately covered, but also to ensure that the insurance truly matches your business’ unique needs and budget.
Now rope in the services of a qualified financial adviser. All the reputable companies that offer business and other insurance products have such individuals available to assist you in choosing the right type of business insurance that would suit your needs, and your pocket. Having some information at hand to guide the discussion will ensure a productive discussion around your unique needs and wants without wasting time on aspects of business insurance that you are not interested in or that you don’t have a need for. Therefore, do some online research on what is available, set your specifications and request a few quotes to compare.
Always ensure that you have insurance in place before you start your business operation, no matter how small and no matter whether it’s a service-oriented or a product-oriented business. You will be interacting with members of the public (your clients or customers), and it is here that your risk starts! You understand the nature of your business as well as its inherent risks and budget best.
Is business insurance compulsory in South Africa?
In South Africa, there are only a few components of business insurance that are compulsory for businesses. However, these elements of business insurance don’t provide protection for all aspects of a business and for complete comfort and peace of mind, businesses and business owners can opt in and pay for a wide range of insurance options offered by various providers of such insurance in South Africa. As with all matters financial, it’s prudent to start off with an analysis of the type of company as well as the business owner’s financial scenario or position, namely what can he or she reasonably afford to pay?
What business insurance elements are compulsory in South Africa?
Legally, the following elements of business insurance are compulsory in South Africa:
- Motor Vehicle Fund (MVF):
All South African motorists contribute to this fund, funded through a fuel levy included in the fuel price. This fund covers a South African vehicle owner or driver in the case of a third party being hurt or killed in a motor vehicle accident resulting from negligence. The fund will pay for hospital and medical expenses, loss of income due to the accident, as well as compensation for pain, suffering and disfiguration.
- Unemployment insurance fund (UIF)
Contributions to the Unemployment Insurance Fund (UIF) by employers, employees and the state are compulsory. Employer contributions must be deducted from an employee's salary and paid over to the Unemployment Insurance Fund (monthly or annually). As from April 2003, domestic workers are included as employees for whom compulsory contributions to the UIF must be made. In the case of the contributing employee becoming unemployed, the UIF will pay him/her an allowance for a period of up to 26 weeks or until new employment is found.
- Workmen's compensation
This element of insurance that employers have to provide covers both the employer (when a claim is instituted against him/her) and employee in case of death or disability resulting from accidents at work. The fund provides compensation for medical expenses, loss of life and/or disability to employees and their dependants.
- Public liability insurance
Members of the public visit and work at a business. When an accident happens at the business, the member of the public involved in the accident can sue the business for damages resulting from such an accident.
What other forms of business insurance are available?
Business insurance in South Africa is critical to ensure that you and your business are protected from unexpected or unplanned events. Business insurance takes the sting out of doing business and not only protects your bottom line, but enables you to focus on growing your business with happy employees. South African insurance companies and some banks offer comprehensive and unique insurance options for business owners and businesses (across the sectors) alike.
Agricultural insurance because farming is big business
The objective of agricultural insurance is to provide protection for the specific and unique risks inherent to this form of business. This policy, also offered by First National Bank (FNB) , gives the farmer peace of mind and enables him to focus on farming by taking care of the farm as well as the personal insurance needs of the farmer.
Apart from comprehensive public liability insurance, this type of insurance covers damage to crops (hail damage, drought and natural disasters included), farm buildings, business equipment (i.e. tractors, harvesters, planters). Livestock and game are also protected, while pumps and irrigation systems, commercial and personal vehicles (cars, bakkies and trucks) are also covered.
Protection for various assets and liabilities is offered under this type of insurance policy, which also covers the farmer in case of some unique financial losses. The farmer is further covered against various general kinds of damages, including a number of natural disasters and damages resulting from theft (a burglary or employee theft), malicious damage, accidental loss of keys, collision and overturning as well as business interruption.
Insurance for other types of businesses
One of the most comprehensive business insurance solutions that we have come across is offered by Santam. While this is a standard solution, the business owner can also opt for additional coverage options.
Their standard solution provides cover for:
- Buildings (combined)
- Office contents
- Business interruption
- Goods in transit
- Business all risk
- Accidental Damage
- Fidelity insurance (Theft by employees)
- Public liability insurance
- Personal accident
- Electronic equipment
- Machinery breakdown
Other unique business insurance offerings
Late last year, Discovery added quite a unique business insurance product to their Discover Life product range, namely the Discovery Life Business Life Plan. This business insurance policy is designed to protect the business owner, his/her business as well as his/her family in the case of death, disability and serious injury. A Buy and Sell Agreement provides for seamless transfer of ownership, Keyman Cover provides for loss of skills and expertise, while Contingent Liability Insurance will cover any outstanding business loans at the time of the business owner’s death, disability or when he/she is seriously injured.
In keeping with the Discovery model that South Africans have become used to over the years, health plays a key role in this product and Discovery rewards policy holders with wealth for their good health. A policy holder’s health and wellness as well as his/her Vitality status all come into the fray and combine to make up this unique product.
There are a myriad of business insurance products on the market, all offered by reputable South African financial services companies as well as some of the banks. Peace of mind and comfort for the business owner are at the heart of all these offerings, enabling the business owner to focus all his/her attention to the business knowing that he/she has sufficient protection from a wide number of potential risks. While affordability of business insurance will inevitably enter the discussion, this question can never be ‘Can I afford to take out business insurance’, but rather ‘Can I afford NOT to take out business insurance’? The answer to the second question is self-explanatory, as no one knows what the future holds.
Just thinking about natural disasters, the names of towns such as Laingsburg and Merriespruit come to mind. However, some towns in the picturesque Garden Route can be added to this list, Marikana and – if you want – you can even add the South African Parliament to the list because as we said, nobody knows what the future holds…