Small Business Insurance Needs | SA Policy Guidelines

Small and medium enterprises (SMEs) are the core driver of a country’s economy. In South Africa, SMEs provide roughly 47% of employment and account for 20% of Gross Domestic Product (GDP).

Unfortunately, the failure rate of small businesses in South Africa has increased in the last few years. According to a report by Cova Advisory, five out of seven small businesses fail within the first 24 months.

SMEs fail due to several factors. These include access to start-up funding, low cash flow, and lack of foresight. SMEs that do survive their first year, can succumb to operational failures from external factors in the following years.

One of these external factors is not having business insurance to protect the business against unforeseen perils. So what are the insurance needs that all small businesses must consider? Let’s find out.


Small Business Insurance in South Africa

There are several types of business insurance policies in South Africa. Business Owner’s Policy (BOP) is the standard. The cover combines business property, business interruption, and business liability insurance.

A BOP protects businesses against property damage, third-party injury claims, and loss of income due to peril. All small businesses must at least have this cover to ensure that they are not at risk of unwanted financial obligations.

Types of Business Insurance Your Small Business Needs

BOP coverage does not cover all kinds of unwanted perils. Therefore the policy may not be sufficient for some companies whose operations span further than day-to-day customer interactions.  

Here are several other insurance types that small businesses must consider.

General Liability Insurance

This policy covers a business against property damage and occupational illness or injury claims. 

The difference between BOP and general liability insurance is that the latter will also cover businesses against slander or reputational damage, copyright infringements, and advertising injury. 


Commercial Property Insurance

This insurance covers businesses against physical property damage, whether owned or rented. It also covers company equipment such as office furniture, computers, and inventory.

The policy essentially covers a business for loss of income due to perils such as flooding, lightning, wind, and fire. Commercial property insurance furthermore covers costs that occur due to theft or vandalism. 

Commercial Umbrella Insurance

Insurers offer extended commercial insurance to cover payout shortfalls from other liability covers as an extra protection layer.

This extended cover is known as commercial umbrella insurance. The policy covers any payout deficits from general liability and vehicle insurance. 

Vehicle Insurance

Business vehicle insurance safeguards company-owned or rented vehicles against damage caused by collisions, theft, or fire. The cover also protects your business from third-party claims.

If you use a private vehicle and have personal vehicle insurance, the cover will not pay for damages incurred while conducting business operations. 

Should you wish to conduct business with your private vehicle, you will need a custom policy that will cover perils from business operations. The insurance will not cover employee injury during an accident as this falls under the workers’ compensation policy.


Workers’ Compensation Insurance

Worker’s compensation insurance provides coverage against employee claims due to occupational illness, injury, and death.

The policy will cover the costs of employee medical bills, rehabilitation, and loss of income due to disability or death. 

Unlike the other insurance types listed above, workers’ compensation insurance is mandated by the Compensation Fund. A business with one or more employees must register with the fund to avoid employee lawsuits. 

Business Interruption Insurance

This policy covers the loss of income that a business may experience due to temporary closure. Temporary business closure may result from property damage due to water, fire or theft, and notifiable diseases or outbreaks.

The policy will cover for income lost during the closure, costs incurred to repair or replace equipment, and the cost of moving operations to a temporary location.


Cyber Liability Insurance

Cyber liability insurance is a more recent type of insurance. It is mainly for businesses that run their operations on technology-driven functions like cloud information storage. The policy covers the company against cyber attacks, data leaks, or breaches.

Should a client’s information be breached, the policy will pay for the costs incurred from client lawsuits and claims. 

Errors & Omissions Insurance

This insurance covers a business against mistakes they may make while conducting business operations. 

This type of insurance is more prevalent in businesses that offer professional or advisory-related services. Hence the policy is also referred to as professional liability insurance.

The policy will cover you and your employees against client claims due to misdiagnosis, negligence, or inaccurate advice. The coverage includes paying for legal costs incurred from client lawsuits.


Loan Insurance

A loan protection policy covers a business against its credit obligations during a crisis. The policy covers a company should it fail to pay its creditors. 

This failure could result from bankruptcy, insolvency, or business interruption due to political instability.

Trade Credit Insurance

The opposite of loan protection insurance is trade credit insurance, which covers a business against payment failure by its debtors. 

The cover safeguards a business’ from cash flow interruptions and allows the company to continue despite payment defaults from its debtors. 

Advantages of Insurance for Small Business

Every business faces operational risks and hazards. 

Without business insurance, companies will have to dig deep into their pockets to cover third-party lawsuits, employee claims, or income losses due to unwanted perils.

The advantages of business insurance for smaller companies include but are not limited to:

  • Uninterrupted business operations
  • Minimum cash flow disruptions
  • Credit-backed business expansions
  • Lower interest rates on loans
  • High credibility from customers and suppliers 


Small Business Insurance Cost in South Africa

Business insurance costs are dependent on the coverage that your policy provides. Policies that cover more often cost more in monthly premiums. Small businesses typically pay less insurance than their medium to large counterparts because they don’t have as many insurance needs. 

Insurers usually offer small businesses comprehensive coverage that will cover primary liabilities that all companies cannot avoid.


Small businesses need insurance to safeguard themselves against claims and disruptions. Although they may not need every insurance policy, they need comprehensive cover and workers’ compensation insurance.

The insurance needs of a small business correlate to its level of operations. As a business grows, it must take on more insurance to protect itself from unwanted perils that are now more likely to occur.


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