Types of business insurance in South Africa

Whether you own a start-up or are the CEO of a large corporation, business insurance is a non-negotiable expense that has to be put in place, maintained, and updated as the needs of the business change over time.

So what is business insurance and why do we need it?

The term “business insurance” encompasses a variety of forms of commercial insurance. Particularly for large corporations, insurance is a legal requirement, and not having it in place can lead to fines and prison time in addition to heavy financial losses.

There are many types of business insurance in South Africa ranging from car and property insurance that most businesses will require to the specific cover offered based on your industry or profession such as medical business insurance or insurance for directors and officers who are often liable for a variety of losses and claims.

Below we’re going to go through some of the most common forms of business insurance by telling you what it is, why you need it, and some general advice.

Types of business insurance

Fleet or commercial vehicle insurance

If you have one or more vehicles registered in your company name, you probably also have commercial vehicle insurance (or are rightfully looking to take out cover). While taking out car insurance for one or two vehicles is fairly straightforward, it gets a little more complicated when we’re looking at an entire fleet.

To minimize cost, and simplify matters most companies take out what is known as fleet insurance which covers all the company’s on-road assets as a whole rather than each vehicle individually. In addition, large transport and logistics companies have very specific needs which only a specialized insurer will be able to ascertain and meet.

An example of such special needs is cover for multiple drivers, long-distance usage, cross-border cover, and liability cover for businesses that transport people – and all these factors will be taken into account to determine the fleet rating which will, in turn, determine the cost of cover.

When it comes to car insurance you may opt for comprehensive cover which covers most risks faced by businesses or third-party fire and theft which will allow for a lower premium but limited cover.

Commercial Property insurance

This is a form of business insurance that covers the property and any machinery, equipment, furniture, or stock belonging to a business. Whether you have a small business or are running a large company, property insurance is a must.

If your property structure or any of your machines or equipment is damaged as a result of theft, fire, or a natural disaster such as flooding, your property insurance will kick in and pay out the replacement or repair value. It should also cover you for loss of rental up to a certain percentage.

Be careful not to fall into the trap of taking out insurance according to your bond value alone only to find out that you’re devastatingly underinsured when something goes wrong. Remember that fixtures and fitting should also be included. To avoid this make sure that your insurance covers you for the full replacement value.

Business Interruption insurance

This form of insurance covers a business after it experiences a serious interruption in its business and cannot continue to provide goods and services as per normal. If you own a furniture store that suffers from a business interruption due to a serious fire, the loss of income will be covered.

While this form of insurance has been front and centre of a number of high-profile cases as a result of the Covid-19 pandemic, its importance should not be underestimated.

Public liability insurance

This is arguably one of the most important types of business insurance offering your protection from third-party liability claims. For example, if a member of the public is severely injured on your business premises and you’re found liable or if one of your employees causes damage or loss to a third party in the course of his or her duty and your business is found liable.

Public Liability Cover Often Pays For:

• Accidental death caused
• Accidental injury or illness caused
• Accidental damage to the property of a third party

This cover will pay the amounts that you are legally liable to pay as well as the legal costs of the plaintiff and your legal costs as incurred for the purpose of defending or settling the claim. This type of insurance is combined with cover for product liability which will cover any liability you face as a result of defective products or services supplied by you.

Fidelity insurance

Fidelity insurance covers your business for any loss or damage incurred as a result of employees theft or fraud. This type of insurance is particularly important for those who risk the loss of money and property at the hands of dishonest employees.

The sad reality is that 9 out of 10 cases of fraud committed against businesses were perpetrated by the businesses’ own staff. Further, the directors and officers of a company may be held responsible for the loss caused by employee theft or fraud if the directors and officers did not take out sufficient insurance to mitigate such risks.

Business or office contents insurance

This form of insurance is the equivalent of home contents insurance for individuals and covers a business for loss or damage to office equipment. Some insurers prefer to group this type of insurance with fidelity, stock, and electronics insurance and term it “property insurance”.

Most office equipment will be covered by a general policy but if you want to cover specific expensive equipment, you’ll have to take out specific insurance policies for the items. Examples of items that are covered are equipment, tools, computers, and furniture.

Theft insurance

This type of insurance will cover your business against robbery and theft (sometimes only as a result of forced entry) but can also sometimes be packaged together with fidelity cover which covers losses incurred by the business as a result of theft or dishonesty by employees.

South African businesses are a prime target for a wide array of robberies and burglaries and theft insurance is necessary to mitigate such high risks. Some theft insurance policies will also cover the personal property of employees.

Employer’s liability cover

If the Workmen’s Compensation Act does not cover certain legal liability for personal injury to employees you may need employer’s liability cover. This includes the costs of defending, settling, and investigating claims.

Other types of insurance for businesses

The types of business insurance discussed above are by no means exhaustive of all the types of insurance available to businesses. In fact, when it comes to business insurance it pays to speak to a professional consultant who will be able to help you ascertain the particular risks faced by your business and tailor a comprehensive insurance package to your needs.

That said we encourage comparing quotes from a handful of insurers and even taking out insurance with a range of providers to ensure the best cover possible.