In many cases, after starting a business, you are highly likely to face a considerable number of risks while running it. Maybe it is the case in which your inventory gets destroyed by fire or one of your employees gets injured while working. With the protection of insurance, you can minimize the cost when these risks unpredictably happen.
In this blog, let’s go through some of the main types of business insurance in Singapore that your company needs and dive into how they work.
1. Importance of Business Insurance in Singapore
Needless to say, insurance is essential for any business. There are many reasons why you should buy insurance:
- You cannot predict the future. No matter how good you are at running business, there will always be risks that are out of hands such as natural disasters or employees’ injuries. Insurance helps companies survive through those unexpected risks and keep them on going afterwards.
- Some types of insurance are mandatory for a business to have and it is deemed by the laws. For instance, work injury compensation insurance is a must under the Work Injury Compensation Act (WICA).
- Businesses can be financially backed up by insurance when getting sued. Everyone knows that the cost of legal defense is extremely high and you can still go out of business due to that reason, regardless of the result of the lawsuit.
- Insurance is crucial for your employees. It is the second priority that many people look for in the contract after salary because it is considered one of their major benefits. Companies with insurance definitely look more credible than those with none.
2. Main Types of Business Insurance in Singapore
In general, there are 3 types of insurance that one company needs: Insurance for property, for employees and for liability.
2.1. Insurance for Property
First thing first, property refers to buildings, machinery, equipment, materials, furniture and so forth. These physical assets can be costly to buy and highly valuable so they should be protected against risks.
Property insurance in Singapore will financially cover the loss or damage to the assets. Particularly, below are some of the most common insurance:
- Fire insurance for the damage caused by fire to the business assets in Singapore. It can be also extended to cover other natural disasters
- Thief insurance for the damage or loss caused by robbery
- Terrorism insurance for wrongful use and violence against people or property in Singapore
- Business interruption insurance for lost revenue, profit or expenses in the event of operation suspension in Singapore resulting from perils such as flood or lighting
- Select insurance plans for specific risks in different particular industries
2.2. Insurance for Employees
As aforementioned, there are some types of employee insurance that are mandatory in Singapore:
Work Injury Compensation
Under the Work Injury Compensation Act (WICA), both local and foreign employees can make claims for work injuries or diseases. It covers the claims for medical leave wages, medical expenses and lump-sum compensation for permanent incapacity or even death.
Pursuant to the Act, it is compulsory for employers to purchase work injury compensation for:
- Employees doing manual work, regardless of salary, age or nationality, and
- Employees doing non-manual work and earning up to $2,100 per month (the threshold will change to $2,600 in April 2021)
However, the WICA does not cover the following targets:
- Independent contractors and the self-employed
- Domestic workers
- Members of the Singapore Armed Forces, Singapore Police Force, Singapore Civil Defence Force, Central Narcotics Bureau and Singapore Prison Service.
Any employer who fails to supply work injury compensation may be convicted to a fine of up to $10,000 or imprisonment up to 12 months or both.
For employees who are residents in Singapore, there will be Medishield Life which is a basic health insurance plan, administered by the Central Provident Fund (CPF) Board. Employers can purchase additional coverage that is not provided by MediShield Life for their employees.
As for non-resident employees:
- For S-pass holders and foreign workers with Work Permit, as an employer’s obligation, you must buy and maintain medical insurance for every employee as long as they still work for you.
- For Employment Pass holders, it is not compulsory for employers to insure them. However, you still can optionally purchase private medical or health insurance for these employees in Singapore as part of their employment benefits.
2.3. Insurance for Liability
At a certain point of time, your business might take responsibility for compensation (for damaged products, for example) or even yourself, as a director, might get involved in a lawsuit. In case those incidents happened, having insurance would be a huge relief since it could cover a significant amount of expenses. You should consider some of the followings:
- Public liability insurance: it covers the damage for bodily injury or caused to properties and premises as a result of your business operations, manufacturing, distribution, or sales in Singapore.
- Director and officer insurance: it financially backs up directors or your key officers in Singapore in case they might face a lawsuit for wrong-doing or breach of duty.
- Professional indemnity insurance: the name says it all, the insurance provides indemnity for specific professionals in Singapore such as lawyers or accountants when they hold liability for their work accidents or negligence.
- Cyber insurance: this is important since the Internet landscape is ever-evolving which results in higher danger from cyber threats. Usually, the insurance can cover business liability for data breach, costs of data recovery or even provide funds for a company to continue its operation.
In a nutshell, there are many reasons why a company in Singapore, your company, should have business insurance and the main one is you cannot precisely predict what risk may happen at what point of time in the future.
Property should be insured due to their high value. Employees should be insured with at least compulsory insurance mandated by the law. And, insurance for liability should not be overlooked since mistakes are inevitable while running a business.
Should you have any further related question, feel free to contact our experts!