3 Types of Insurance Every Singapore Business Needs

Often mistaken for simply being a regulatory requirement, business insurance is not only about protecting you or your business. It is also a way of protecting your employees, your suppliers and even your customers from some of these threats.

Think about the consequences should an unfortunate fire destroy your retail establishment and you are not insured. What about a delivery employee who meets an accident on one of his/her delivery assignments?

These are very real situations that have caused extreme hardship to both employees and employers when there was no proper insurance in place. Properly insuring your business gives you the peace of mind to focus on major issues like improving profitability and productivity.

This guide aims to provide an understanding and overview of the business insurance relevant to owners who are either looking to or have recently started a business.

What are the Major Types of Business Insurance?

For most businesses, the types of insurance available can be classified under 3 general categories:

1. Property
2. Employees
3. Legal liability

1. Property

The first category, Property pertains to any buildings, plant, machinery, equipment, stocks, furniture, fixtures and fittings, etc. Property insurance covers loss or damage to your business properties.

Purchasable insurance can provide coverage for the following:

• Fire insurance, which also extends to other perils like lightning or floods
• Theft insurance in the event of burglary or robbery
• Terrorism insurance in the event of unlawful use or violence against people or property
• Business interruption insurance to help to cover lost revenue, wages or ongoing expenses incurred in the event of suspended operations due to material damage from a fire or flood
• Select insurance plans which are catered to the risks in your business industry. For example, logistics companies providing shipping courier services can purchase marine/cargo insurance plans to cover cargo in transit

It would be prudent to first make a list of the most direct threats to your business premises and properties before consulting with a licensed insurance provider who may be able to structure a package suitable to your business needs.

2. Employees

Depending on the employment status of your workers, it might be a statutory obligation to insure them. Of the insurance applicable to employees, the 2 most important are work injury compensation insurance and basic health insurance.

(a) Work injury compensation insurance

Work injury compensation insurance provides cover for your company in the event that your employees file claims for injuries or diseases suffered while working.

Under the Work Injury Compensation Act (WICA), all employers are required to purchase work injury compensation insurance for local or foreign employees who are doing:

1. Manual work, regardless of salary level; and
2. Non-manual work, and are earning up to $2,600 monthly.

Please note that the above does not apply to freelancers or independent contractors that you engage. Employers who fail to provide work injury compensation insurance when required to do so face a fine of up to S$10,000, jail of up to 12 months or both for a first-time offence.

Workman injury compensation insurance is important especially for companies involved in construction or heavy industry, where there are higher risks of worker injury.

Work injury compensation insurance can provide monetary protection in the form of payment of medical leave wages or expenses to your workers should they suffer any injury during the course of their work.

For more details on the entitlement and liability for compensation, please refer to our article on claiming work injury compensation.

(b) Basic health insurance (MediShield Life)

Singaporean employees

The Employment Act requires all employers to make CPF contributions for all Singaporean employees, a portion of which will be allocated to MediShield Life. MediShield Life is a basic health insurance only for Singaporeans to help them or their dependants in the event of old age or serious illness in the future.

You have the option to buy additional coverage that is not provided for by MediShield Life for your employees’ benefit.

S Pass & Work Permit holders

Although S Pass and Work Permit holders  are not eligible for MediShield, you are still required to purchase medical insurance plans for them.

These medical insurance plans must be maintained for your S Pass holders and Work Permit holders as long as they are under your employment.

Please refer to the MOM website for more details on the health insurance requirements for S Pass and Work Permit holders.

Employment Pass holders

Employment Pass (EP) holders are not entitled to Medishield contributions. However you as the employer can voluntarily choose to purchase private medical insurance for them as part of their employment benefits.

Private medical insurance for EP holders can be structured as a Group package/benefit that can include dental, personal accident, hospitalisation and even maternity cover.

Alternatively, your employees may already have their own Integrated shield plans from their insurance provider, and you can choose to subsidise the costs while they are under your employment.

As work injury compensation insurance and Medishield contributions are mandatory, it is critical that your business has made the adequate provisions for these insurance schemes before you decide to purchase additional insurance benefits for your employees.

3. Legal liability

There is always the unfortunate risk that your business can be held liable for compensation due to acts of negligence by your employees in the course of their work.

• Public liability insurance can provide coverage where the following might occur:
  • Bodily injury or damage to property and premises resulting from your business operations
  • Bodily injury or damage to property and premises resulting from the manufacturing, distribution or sales of your product
• Director and officer insurance is an important way of providing indemnity to the key decision makers in your company, especially since it can detrimentally affect your business should they be held liable for breach of duty or negligence.
• Professional indemnity insurance is specific to your professional occupation and provides coverage against legal liability arising from acts of negligence. This includes auditors, lawyers, accountants and should be purchased depending on your profession.

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Despite the many different insurance providers and insurance solutions available in the marketplace for businesses, they can be generally classified under the 3 broad categories of Property, Employees and Legal Liability.

As always, it is important to first understand the nature of your business and perform a threat assessment to best determine the scope of your liability in the event of any unfortunate situations.

It is equally important that you consult with a licensed insurance provider or broker who is familiar with your business industry and can advise you accordingly on the more appropriate business insurance.

By doing so, you and your business will be better prepared to weather any challenges or disruptions while still maintaining functional business operations.