Small and medium enterprises (SMEs) are the lifeblood of South Africa's economy, providing about 60% of formal employment. If you're a small-business owner who relies on your SME for your family's livelihood, it's essential that your business is covered by the right type of insurance for all the threats it faces. 

The risk of not having business insurance far outweighs the cost. Risks come in many forms – from minor break-ins and stolen stock to natural disasters like fire and floods. There are several categories of business insurance, and the types of cover best suited to your SME will depend on the specific details of your business and its processes. 

But the biggest risk to all small-business owners is not having insurance when disaster strikes. The right business cover should be a non-negotiable part of your budget.

The role of risk assessment 

It can be intimidating to list all the potential risks specific to your business so you can guard against each one with the appropriate insurance. It's important to get the balance right – whether you fail to cover a risk you should insure against (leaving you underinsured) or buy cover for a risk that doesn't apply (making you overinsured), you're adding unnecessary costs. 

Discuss your policy needs with a qualified insurance professional who can evaluate your business risks and advise you on which risks to consider when deciding what insurance cover you need.

 Types of business insurance

There is a standard set of business insurance offerings available to SMEs. Some, like general property cover, apply broadly, while others depend on your business activities and specific requirements. Key types of business insurance include:

• General liability insurance 

Provides basic business protection. It covers situations where someone is injured or suffers a loss because of your business – for example, a customer having an accident in your shop or your delivery driver damaging someone else's property. This cover is especially important if your business deals with the public or suppliers. 

• Commercial property insurance 

Protects physical business premises against risks such as theft, fire, natural disasters, and malicious damage. Structure your policy to cover loss or damage to buildings, equipment, tools, machinery, and stock at their true replacement value, not just the original purchase price. 

• Cyber liability 

Covers risks like hacking, data breaches, and online fraud. A cyberattack can lead to lost client information, legal costs, and reputational damage. Cyber liability insurance helps with data restoration, cyber extortion, and recovery costs after a hacking or ransomware attack. 

• Workers' compensation 

A mandatory expense if you employ staff. You must pay a monthly fee to the government to cover medical expenses and lost wages if an employee is injured or becomes ill on the job. Consult an insurance professional to understand your SME's legal obligations.

South Africa's business insurance sector offers additional products to cover other liabilities and risks that can affect property or operations. Explore our earlier business insurance blog for more options.

Business insurance: Essential for small businesses

Proper business insurance is as important to your SME as startup capital, so make it a priority. Common business risks, like legal claims, property loss or damage, employee injuries, and cybercrime, can spell disaster for a small business without the cash flow or financial cushion to absorb those losses. Think of the right insurance for each risk as your safety net, protecting your business from unexpected shocks. 

Visit Nedbank's SimplyBiz for a full range of advice and support for your small business. Nedbank also offers a comprehensive set of small-business and industry-specific insurance solutions. 

Nedgroup Insurance Co Ltd. A licensed and designated insurer and FSP (41104).