Do you really need Business Insurance?

Business insurance seems like it is something mandatory for many SMEs in Singapore but not all SME owners in Singapore have business insurance. Since SMEs employ almost two-thirds of working Singaporeans, it is essential for business owners to get insurance covering employees and other areas of the company.

In today’s article, we look at why it is important to have business insurance and the types of business insurance policies that may apply to SMEs.

Why you need business insurance

Getting insurance and investing in the right policies now might seem like a lot of work to do but it will eventually save you from potential legal issues and unnecessary costs (if you face any) down the road.

SME owners should know that having a business insurance is not only about protecting you or your business, but it is also a way of protecting your employees, your suppliers and even your customers from some of the risks in everyday business activities.

For example, a mishap such as accidental or arson fires may destroy your retail establishment or a rider on delivery may get into an accident on one of their delivery assignments and you do not have insurance. These are just two of many realistic situations that may cause extreme hardship to both employees and employers, and having no proper insurance in place will only make things worse. When there is proper insurance in place, it gives you the peace of mind to focus on major issues instead such as increasing profitability and productivity.

Getting Business Insurance

Before you get started with your insurance, you need to figure out what specific risks that different types of coverage actually protect against, and whether or not they apply to your business. A few things that a typical insurance would cover are accidents, theft, damage and legal fees, but the exact cover depends on the business itself.

Other factors such as location, industry, and the number of employees can all affect what coverages are applicable. To ensure your new business is always protected, below is a list of common business insurance policies that may apply to SMEs.

Business insurance policies

For most businesses, the types of business insurance can be classified under 3 general categories, namely – property, employees and legal liability.

1. Property

Property includes buildings, plant, machinery, equipment, stocks, furniture, fixtures and fittings that you have in your company. Property insurance covers loss or damage to these properties and can provide coverage for fire (including lightning or floods), theft, terrorism and business interruption (including lost of revenue, wages or ongoing expenses incurred in the event of suspended operations).

The first step for the owners is to list the most direct threats to your business properties before consulting with a licensed insurance provider who may be able to design a suitable package catered to your business needs.

2. Employees

The 2 most important insurance for employees are work injury compensation insurance and basic health insurance. However, the employment status of your employees determines if it is a statutory obligation to insure them.

(a) Work injury compensation insurance

Even if you only employ one person and that employee of yours gets into an accident at work, you still face the risk of a potential lawsuit – especially if the industry your business is in is known for work-related illnesses or occupational hazards.

Work injury compensation insurance protects both the employee and the employer. If an employee becomes ill on the job or sustains an injury, workers’ compensation covers medical costs, and wages. On the other hand, it would protect the employer from the potential lawsuit that resulted from the accident. (Source: Bplans)

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
  2. Non-manual work, and are earning less than S$1,600 monthly

The above does not apply to freelancers or independent contractors. Employers who fail to provide work injury compensation insurance when required to do so face a fine of up to S$10,000 or jail of up to 12 months, or both.

For more details on the entitlement and liability for compensation, please visit to the Ministry of Manpower’s (MOM) website.

(b) Basic health insurance (MediShield Life)

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

For S Pass and Work Permit holders, employers are still required to purchase medical insurance plans for them so long they are under your employment.

For more details on the health insurance requirements for S Pass and Work Permit holders, please visit the MOM website.

3. Legal Liability

There will definitely be a risk of your company being held liable for compensation due to acts of negligence by your employees in the course of their work. Thus, 3 insurance that you can consider to have are public liability insurance, director and officer insurance and professional indemnity insurance.

Public liability insurance provides coverage for bodily injury or damage to property and premises resulting from your business operations or from the manufacturing, distribution or sales of your product.

Director and officer insurance provides indemnity to the key decision makers in your company and it is important since it can detrimentally affect your business should they be held liable for breach of duty or negligence.

Professional indemnity insurance is provides coverage against legal liability arising from acts of negligence. This includes auditors, lawyers, accountants and should be purchased depending on your profession. (Source: Singapore Legal Advice)

In conclusion

As a SME owner, you should take you time to do your proper research to determine the best way to protect their business either for expansion purposes or simply to protect your investments. You can also consult with a licensed insurance provider or broker who is familiar with your industry and can advise you the business insurance that is more suitable for your business.

With proper understanding of the insurance policies that are applicable to your business will allow business owners to be better prepared to make sure their venture is well-protected in the long term.


That said, if you’re interested to learn more about business strategies and issues that concern SMEs, follow the H.E.R Entrepreneur Facebook page. We post weekly articles on a variety of business related topics, and it’s all completely free.

If there’s a particular topic that you’d like us to talk about, please feel free to leave a comment!

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