Running a business is not for the faint-hearted. There are countless uncontrollable risks that influence the success or failure of the business. Accidents happen, and they can happen in your business. This is why all businesses should understand and take out business insurance. Most South African insurance companies such as Alexander Forbes, Hollard and Discovery, as well as banks such as Standard Bank provide business insurance products.

What is business insurance?

The term “business insurance” encompasses different types of cover that protect businesses from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability and employee-related risks. Businesses must evaluate their insurance needs based on potential risks, which vary based on each business’s environment.

Is there compulsory business insurance in South Africa?

According to South African law the following types of insurance are compulsory:

  • Motor Vehicle Fund (MVF): An owner or driver of a car is covered by this fund when a third party is hurt or killed in an accident from negligence. A levy is charged on petrol sold to motorists to collect money for the fund. The fund will pay for hospital and medical expenses, loss of income due to the accident, and compensation for pain, suffering and disfiguration.
  • Unemployment insurance fund (UIF): The Unemployment Insurance Act is a compulsory state scheme whereby the employer, the employee and the state contribute to the fund. When a contributing employee becomes unemployed, the fund will pay him or her an allowance for up to 26 weeks or until new employment is found.
  • Workmen’s compensation: Employers must insure employees against death or disability due to accidents at work. The fund will provide compensation to workers and their dependants for medical expenses and for loss of life or disability.
  • Public liability insurance: A business is a place where the public may work or visit. Should an accident happen at the business, for example a member of the public slips on a wet floor, he or she can sue the business for damages.

What other types of business insurance are available in South Africa?

Insurance for your business

  • Building insurance: These policies typically cover damage caused by fire, lightning, wind, snow or vandalism to your property.
  • Vehicle insurance: If you have a vehicle in the business name, vehicle insurance is required to cover the risk of using the vehicle for business purposes.
  • Business contents insurance: Business contents insurance covers loss or damage on all moveable items in your business, caused by fire, flooding, snow, hail, wind, impact or explosion.
  • Specialist business insurance: This type of insurance is far more complex than everyday ‘off the shelf’ insurance. Insurance providers will look at the business’s individual needs and develop a tailor-made solution.

Insurance for you and your employees

  • Health/medical aid insurance: All businesses should insist that employees have some form of health cover, since an employee’s illness or accident can devastate your business if they don’t have proper cover.
  • Disability/dread disease insurance: These policies replace your/your employees’ income and cover expected medical costs as a result of you/your employees’ being disabled or contracting a dread disease.
  • Life insurance: If you/your employees have a family or other people depending on you, life insurance is recommended. As a business owner, you may also want to look at how your life insurance policy can be used for your business. For example, you may be able to use it as collateral for a business expansion loan from your bank.