Starting Up a Business? The Ins and Outs of Business Insurance (2024)

Taking the leap from being an employee to an employer or someone who is self-employed should not be taken lightly. It takes a lot of hard work, plenty of thought, long hours and even some courage to start up your own business. And, you need to find the right insurance policy to safeguard your new enterprise.

The good news is that insurance plans and options are available to protect against all kinds of risks, whatever they may be, to your business. The trick is finding the right plan to suit your specific company and industry. Here, we discuss the must-have insurance coverage options for start-up businesses in Hong Kong and China.

1. General Liability Insurance

Regardless of the type of business you have, taking out a general liability coverage option is a no-brainer. This option provides protection against payments for a whole range of risks, such as injuries, accidents, libel, property damage, lawsuit costs and settlements. General liability insurance is especially important for businesses that deal in person with members of the public or those who welcome members of the public on to their premises.

2. Professional Liability Insurance

Those providing services are encouraged to take out a professional liability plan, also known as errors and omissions insurance. With this coverage option, your can protect your business against negligence, errors or malpractice that may occur during the course of providing a service to individuals or other companies. Moreover, this type of insurance coverage may be compulsory in certain sectors.

3. Commercial Property Insurance

Damage to company property is afforded protection with this form of insurance. Property damage can come in many forms, and may be caused by a natural event or another person. Damage as a result of civil disobedience, arson and vandalism falls under this category, plus damage from extreme weather conditions such as flooding or storms. Additionally, the definition of property is not restricted to a physical building: it may also include other assets such as cash, machinery, computers, business interruption or loss of income.

There are generally two different types of policy available under a commercial property plan. These are: (i) all-risk policy; or (ii) peril-specific policy. As the names suggest, an all-risk policy will cover a broad range of risks typically faced by the business. A peril-specific policy will only cover certain risks that may be prevalent to that type of business. As with all insurance options, it is advisable to consult with an insurance broker to ascertain the correct type of insurance most suitable to your business.

4. Product Liability Insurance

Businesses that are involved in the retail, manufacture or distribution industries may be liable for the overall safety of their product. In this case, product liability insurance is recommended. This form of insurance offers coverage against losses in the event of a faulty or defective product causing harm or injury to a customer.

The type of products involved will determine the level and coverage required to protect the core elements of the business.

5. Employee Benefits Insurance

Employee benefits covers a diverse range of so-called perks and bonuses, such as group medical coverage, dental coverage, life insurance, profit sharing, paid holiday/vacation leave and monthly or annual cash bonuses. Employers can take out insurance in this area to protect against an error, omission or mistake in the delivery of these benefits to staff.

A typical example is the failure of an employer to clearly outline the range of benefits being made available to that person. Insurance coverage will therefore protect against any claim made by the employer against the employee for perceived negligence in this area.

6. Directors and Officers Insurance

Depending on the size of the business and the number of staff it has, the managing director may decide to protect it from the actions of the directors by taking out what is known as directors and officers coverage. This form of insurance will protect the business against potential losses arising from the actions of a certain employee or employees. Should those staff members find themselves facing legal charges, this policy will also cover against the cost of these proceedings and any potential damages.

7. Data Protection Insurance

The safe storage and protection of personal information is becoming more and more important in today’s high-tech world. Any business which handles and stores personal and sensitive information of customers is personally liable for the safety of that information. This type of insurance protects the business owner should a security leak or breach of sensitive information occur.

Prior to taking out a business insurance policy, we advise speaking to an insurance professional or broker to gain a comprehensive understanding of the types of insurance available to your specific industry. In addition to receiving professional advice, it may also be possible to take advantage of reduced premiums through smart choices in coverage.