Business Tips

Navigating the Business Insurance Landscape: A Guide for Singapore Start-ups

Lina Tay
March 7, 2023

The importance of business insurance for start-ups

While financing for start-ups is essential for all aspiring entrepreneurs, business insurance is just as important a vital component, because it can protect the company and its owners from financial losses due to unforeseen events such as accidents and lawsuits. Without insurance, a start-up may not have the resources to recover from a significant loss, which could lead to the failure of the business. Additionally, insurance can help a start-up build credibility with potential investors and partners. It demonstrates that the company is proactive in managing its risks and is committed to protecting its assets and stakeholders.

However, deciding between what you want out of insurance and deciding among the options can be a daunting task. We’re here to cover all your worries and prepare you to navigate the business insurance landscape so you can have peace of mind in running your start-up. We first set sail for the types of business insurance present in Singapore.

The different types of business insurance available in Singapore

Public Liability Insurance

Public liability insurance covers a business for financial losses or damages that it may be held responsible for in any case of injury or damage relating to members of the public or third-party property. In an environment where you have a constant flow of people coming in and out, this insurance could be the deciding factor of the start-up's make or break should any accident occur within the business premises.

Property Insurance

Property insurance in Singapore may not be mandatory but should be a must-have for any start-up, protecting your business operations and assets against any losses caused by factors such as fire, theft, and natural disaster. The insurance will also ensure that investments in commercial real estate or other tangible assets remain secure from various sources. By protecting your start-up's property and physical assets, you can sustain its growth and progress.

Professional Liability Insurance / Professional Indemnity Insurance

Professional liability insurance, also known as professional indemnity insurance, provides financial protection for professionals such as architects, lawyers, engineers, accountants, and surveyors, against claims of negligence, errors, or omissions in their work. The insurance plan provides coverage of legal fees, settlements or judgements against the professional, covering up to the policy's limits. The insurance is designed to protect the professional's assets and reputation should a client sue them for a financial loss as a result of their professional services.

Directors & Officers Liability Insurance

Directors and Officers Liability Insurance (D&O) provides financial protection for the directors and officers of a company against claims of wrongful or negligent acts in the course of their duties. This could be a crucial factor for small businesses to consider, as limited resources could contribute to the lack of reliable protection against potential legal action. D&O insurance will respond to cover the cost of any legal actions taken and the subsequent financial settlements after that.

Data Breach / Cyber Insurance

Cyber insurance is a type of insurance that provides financial protection for a company against losses caused by cyber-attacks and data breaches. This can include coverage for the costs of restoring or replacing lost or stolen data and the cost of the investigation and response to the data breach. Cyber insurance typically covers costs associated with network security, media and privacy liability, network business interruption, errors, and omission. Cyber insurance can also cover third-party liabilities that derive from the data breach.

Work Injury Compensation

Work injury compensation insurance provides financial protection for employers in Singapore against the costs of work-related injuries or illnesses suffered by their employees, provided through the Work Injury Compensation Act (WICA), covering the employees from the start to end of their employment. It covers medical expenses, injured workers' lost wages, and legal costs incurred if the business is sued.

Unlike other insurances, all employees, both local and foreign, are required to have WICA insurance provided by their employer should they fall under any of the two conditions:

- Employees are doing manual work, disregarding all levels of salary.

- Employees are doing non-labor work but earn less than $2,600 a month.

Should an employer fail to attain the insurance for these workers, they would have committed an offence requiring the payment of a $12,000 fine, 12 months of jail time, or both.

Commercial Motor Vehicle Insurance

Your start-up might not be in the business of last-mile delivery but if it involves any form of logistics or transportation, you might be in need of a commercial vehicle. In Singapore, it's mandatory to have commercial vehicle insurance. However, it's not advisable to settle for the bare minimum coverage just because it's a legal requirement. Given the regular occurrence of traffic accidents, having adequate car insurance is crucial for safeguarding businesses. While insurers cannot prevent accidents from happening, they do provide essential financial protection for drivers against claims made in the aftermath of an accident.

There are three types of commercial car insurances. They are the third party only car insurance (TPO), Third Party, Fire and Theft Car Insurance and a Comprehensive Car Insurance.

Third Party Only (TPO) car insurance is the most basic and affordable option, covering only damage to other people or their property. It may be suitable for new drivers with old cars approaching the end of their COE lifespan, where the cost of repairs may exceed the car's value, making coverage for third-party damage sufficient.

Third Party, Fire & Theft (TPFT) car insurance is an improved version of TPO insurance, covering loss, theft, and fire damage to your car in addition to third-party damage. However, it is still suggested for older cars and may not be suitable for new drivers as it does not cover damages to their car and can result in significant expenses in case of accidents.

Comprehensive car insurance is the most popular option in Singapore, covering various costs such as repairs and replacement of the insured vehicle. It provides extensive protection and is a recommended choice for those seeking maximum coverage in case of any damage to their car.

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Choosing the right coverage for your start-up

Choosing the right coverage to apply for your start-up can often be a complex process, but there are a few steps you can take to make sure you're getting all you need:

Assess your risks: Identify the specific risks that your start-up may face. Liabilities can come in the form of lawsuits, natural disasters, or property damage.

Research coverage options: Research your available options and compare the benefits, costs, and exclusions. There may be other choices specializing in startup insurance.

Consult with a professional: Consulting with an insurance broker or agent can help you better understand your options and any other legal or regulatory requirements specific to Singapore.

Review & update coverage: Review your coverage regularly, and update it according to your business's growth and development.

It's important to remember that different types of insurance will have different coverage and exclusions, so it's important to carefully review the policy to ensure it meets your needs and insures your start-up against the risks you've identified.

Key considerations when comparing business insurance policies

When comparing business insurance policies, there are several things to take note of, such as the limits of coverage, exclusions of each policy, the claims process, the reputation and financial stability of the insurer, their endorsements, the alignment of legal requirements along with your business and the services they provide overall.

To save you the trouble, sourcing an insurance broker can efficiently resolve the considerations and comparisons for you. However, a commission will have to be appointed to the broker after all is settled.

Conclusion: Protecting your start-up with the right business insurance

Having the right business insurance is essential for any start-up. It helps provide security against potentially crippling financial and reputational damage if something goes wrong. Having the necessary insurance coverage can help entrepreneurs focus on growing their businesses, as it serves as a safety net in case of unexpected events or incidents. After all, no one plans for things like destruction from natural disasters, personal or professional liability claims, customer injury or property damage, but proper protection can ensure that your start-up won't be bankrupted from these occurrences.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.

Business Insurance

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