There are tons of information out there that will tell you what is Corporate Insurance and why you need it. Often than not, the information is very generalised and look like it is just copy and paste out of product brochure which do not make the information really relevant to business owner like yourself.
Over here, i will share what is some of the reasons people will get Corporate Insurance.
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Regulatory
“When your business is suspended, be it from a fire or a loss of a Keyperson or decision maker. You will be compensated for your loss from these events.”
The most immediate need you will see is to follow the law, some insurance mandated by law includes but not limited to: Workman Compensation, Foreign Worker Medical, Company Vehicle etc...
Contract agreement
Sometimes you may go into contract with another party that may require you to have some form of insurance. For example i have a client who runs a F&B business in a high scale building and the Landlord or the Building Management will require them to have Public Liability insurance of a certain coverage amount.
Main reason is that in the event should a fire break out, burn down your unit, its your own loss your own suay, whether you have insurance or not, the Landlord won't bother, however should the fire spread to the neighbour units, definitely the other tenants will find the Landlord or Building Management and demand compensation and in turn the Landlord/Building Management will come after you. If you don't have a proper insurance cover in place, it will be tough to get compensation, so they will make sure there is proper cover in the first place to avoid disputes.
Control cost
“Insurance is to put a cap on the limits of compensation towards the customer. ”
How much cash or assets have you set aside for legal disputes and salvage your brand? Company always need to think of how to control cost and need to justify their spending which is good, what about unexpected expenses such as fire and accident?
With a proper fire insurance for your office and shop, should a fire occurs it will help to pay for your loss and replace office items such as laptops, furnishing etc. Another example will be product to consumers, you may be aware that a few years back a Mobile Phone company (shall not be named) came up with a product that actually explodes, during use or while charging. Of course they did their best to do service recovery by replacing a unit for them, however some customer do not want or even care about it as they may suffered loss of limbs or serious injury. How much compensation will you give to the customer? Insurance is to put a cap on the limits of compensation towards the customer.
Credit Protection
At some point in time, most business will require a form of capital injection be it buying in of shares or taking up a business loan. I had a client, she took up a term loan to be repaid over a period of 5 years, with a monthly repayment of $5,000 per month. What she did not take into account is that she suffered a stroke 5th month into the loan. It cause hardship for her to manage the business while she was still recovering. Credit Protection could pay off a portion or fully should such event occurs.
Employee Benefits
Medical benefits. A popular option for company to give to their staff to help attract talents. It ranges from simple term insurance to hospitalization benefits to GP and Specialist visit and Dental. For some company big enough they may even look at maternity benefit where it help to reduce staff cost for delivery.
Staff Retention
It is also known as golden handcuff, other than CPF and wage raise, there is a limit on how much a company can give an employee to retain them. Why not allocate a portion of your budget to a investment or endowment, which you let a professional help you to grow your employee fund that will grow higher the longer they stay. Not to mention the tax break you enjoy from this expense. Your welcome.
Business interruption
When your business is suspended, be it from a fire or a loss of a Keyperson or decision maker. You will be compensated for your loss from these events. Especially when it comes to a replacement of a keyperson, you will need to factor how long you need to find a replacement and probation of working with this replacement, some positions include C-Suites personnel or business development director etc...
Business Succession planning
simply put, would you accept the wife or family of your business partner to be your business partner tomorrow? Depending on the company structure, you may or may not have a shareholders agreement in place for provision of such event where it clearly spells out such situation where should the shareholder pass away how will the surviving shareholders share the shares. Without a clear spell out agreement, it is deemed to be split equally. Here come the next issues. How much to pay the widow of the deceased shareholder. Where would the cash be from? What if the widow was another shareholder to begin with and this would effectively make her the biggest shareholder from the inheritance?
As a form of promise
Business talks alot about trust, sometimes first time working together may not be easy so there are Bankers Guarantee. If not you can also use TCI (Trade Credit Insurance). These are tools that you promises to the other party that payment will be made once goods are delivered and enforced by a neutral party such as bank or insurance company.
Legacy for family
Business has alot of assets as well as liabilities, while you are able to balance your book when you are gone, high chances are your liabilities become immediate as creditors want to get back their money before other creditors does. You may have your own personal life insurance and after the deduction from taxes, medical bill's and legal fee, and other debts, how much do you really leave for your family?
No matter for what purpose would you get a corporate insurance, it will be best to talk an experienced corporate financial planner to work out with you, after all every business is unique and has their own set of circumstances and challenges.
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If you would want to receive advice on business risk management, you can reach out to: Rayvern.forlife@gmail.com or +65 8382 3194.
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