What’s going to happen in the future heaven only knows. Even the best-laid plans go astray, you never know! The moment you step into the world of business, you expose not only yourself but also everyone associated with your business to RISKS. But, successful business persons are those who hope for the best and are prepared for the worst! And it’s business insurance that prepares you for the worst. Therefore, buying business insurance that’s right for your company is what the doctor ordered.
We all live under the rock, when it comes to purchasing business insurance in the UAE. There are so many types of business insurance available in the market and you can’t find the one that suits your business until you are familiar with the types of business insurance. Once you are aware of the benefits each insurance type offers, it would be a lot easier for you to decide on which insurance is best for your big or small business.
Business Insurance Types for Small Companies
Your small business can get into big trouble if you have not purchased business insurance yet. Business insurance companies safeguard you from the potential costs of claims, damages and lawsuits by offering a business insurance policy. Just like businesses are of different nature, sizes, and types, business insurance policies also come in different types so it can squarely fit into the needs of every individual entity. Let’s understand how many types of business insurance exist in the UAE to help your small business in your difficult times.
Business Owner’s Policy (BOP): Most small business owners find Business Owner’s Policy best for their business because it assembles protection for all major property and liability risks in one insurance package, bringing together the basic coverages required by a business person in one bundle. Offering a combo of three necessary coverages –General Liability Insurance, Commercial Property Insurance and Business Income Insurance – BOP is usually sold at a premium that is less than the overall cost of the individual coverages. A BOP is designed to give protection against property damage, peril, business interruption and liability. Crime, spoilage of merchandise, forgery, fidelity, etc. are additional courage that business owners can opt for as coverages vary among insurance providers. Be informed insurance providers ascertain if your business fits the bill for a BOP studying certain parameters such as business location, the size of the location, the class of business and revenue. A business may be eligible for special considerations if it fulfils specific eligibility criteria.
- Business Liability Insurance: Any type of small business insurance that protects against accusations that your business caused damages, injuries, or losses is termed as business liability insurance. Business liability insurance is basically structured to protect the financial interests of companies and business owners in the event when they have to deal with formal lawsuits or any third-party claims. Such policies cover any direct financial liabilities incurred, as well as any legal defence costs. The cost of coverage is defined by the type and location (companies situated in flood-prone regions are likely to fork out more) of business being insured. The three main types of business liability insurance are – General Liability Insurance, Professional Liability (or Indemnity) Insurance and Product Liability Insurance.
- General Liability Insurance: General liability insurance policies typically cover your business for claims involving bodily injuries and property damage caused by your products, services or operations. In case you are held accountable for damages to your landlord’s property, you are covered by GLI.
- Commercial Property Insurance: Commercial property insurance aims at protecting your owned or rented commercial building as well as physical assets that are used to run the business from fire, explosions, burst pipes, storms, theft and vandalism. However, to have protection against perils like earthquakes and floods one has to add them to their commercial property insurance policy as usually these two aren’t covered.
Business Income Insurance: Also known as business interruption insurance, business income insurance covers lost income when one’s business has to shut down due to a covered jeopardy. Covered causes of loss include fire, theft and wind. Case in point: You have to close down your restaurant for some time in order to repair the damage caused by fire. In this situation your business income insurance can help pay your lost income during this phase.
Commercial Auto Insurance: Unlike your personal auto insurance policy, commercial auto insurance insures cars, trucks and vans being used to perform your small business activities. If not for commercial auto insurance, any claims you make in the wake of an accident and other damage won’t get approved, which could cost you an arm and a leg. Hired and non-owned auto liability insurance offers liability coverage in case employees rent or use their personal cars for business purposes.
Cyber Liability Insurance: Business owners like you are liable to store the sensitive information about their clients and customers safely. But you can’t swear by your information system. Cyber attacks and data breaches can cost your business the earth. But with a cyber liability or security insurance policy you don’t have to fret about the costs incurred due to this. Besides covering the costs resulting from the claims filed by the customers whose data was leaked, the insurance also includes expenses towards things such as notifying such customers, offering them free identity theft/credit monitoring services and creating a public relations campaign.
Indemnity Insurance: Formulated to protect professionals and business owners when they are found to be at fault for a specific event such as misjudgement or malpractice, indemnity insurance policy compensates the insured party for specific unexpected damages or losses up to a certain limit – typically the amount of the loss itself. They generally take the form of a letter of indemnity. Indemnity insurance is a must-have if you render financial and legal services. Some other entities that can benefit from indemnity insurance coverage are insurance agents, graphic designers, interior decorators, advertising agencies, travel agents, management & business consultants, real estate agents, tax preparers, technology professionals, accountants, mortgage brokers and attorneys. Medical Malpractice and Errors & Omissions Insurance are examples of indemnity insurance.
- Medical Malpractice Insurance: It is a liability insurance cover that protects healthcare workers including physicians, doctors, surgeons, nurses and lab technicians from claims of professional negligence including allegations of wrong site surgery, misdiagnosis, surgical errors, medication errors, childbirth-related injuries and other claims of wrongdoing. For instance, if a patient or their family member sues an insured physician for performing wrong surgery, the insurance company will pay all the costs cropped up due to the situation.
- Errors and omissions (E&O) Insurance: Sometimes called professional liability insurance, E&O insurance covers indemnity resulting from mistakes that certain professionals make in their work. The covered faults include misrepresentation, violation of good faith and fair dealing, negligence and giving false or inaccurate advice. The insurance company also pays for legal defence costs, judgments and settlements. If not for E&O insurance, gird yourself up for reimbursing customers out of your own pocket and paying for a lawyer as well.
- Technology Errors & Omissions Coverage: If you are a computer consultant, internet service provider, IT contractor, software developers, website developers or work in any technology field, this insurance type is for you. Technology Errors & Omissions Coverage can keep you from footing the bill for legal and other costs from claims made by customers against a small technology business. JSYK, technology E&O insurance is one of the E&O Insurance types in UAEbut is completely different from cyber insurance as the latter addresses a data breach or cyber-crime for businesses that use technology, which is really almost any business today.
Commercial Umbrella Insurance: Most business owners cringe at buying commercial umbrella insurance, an additional liability coverage, as it’s an additional cost that can burn a hole in their pocket, but those who take it up say it’s all worth it. The commercial umbrella insurance provides the insured entity with an additional layer of protection above the other liability insurance policies they carry as a small business. In case you hit your liability limit on the fundamental insurance policy, commercial umbrella insurance will give extra liability protection. Commercial umbrella policy can be used with a general liability policy and a commercial auto policy. With a commercial umbrella policy, an insured party doesn’t have to worry about the additional expenses and fees coming into picture in the event of surpassing the liabilities covered under the underlying policy. Say for example your company has to shell out indemnity of AED 1.5 million but your existing business liability insurance policy covers only AED 500,000. The shortfall of AED 100,000 would be paid by the insurance company from where you have purchased the commercial umbrella policy.
Workmen Compensation Insurance: Signing up for workers or workmen compensation insurance is mandatory even if you have just one employee working in your Dubai free zone company. Workmen compensation insurance takes responsibility to pay all your insured employees’ medical bills and loss of wages in the event of occupational injury and occupational sickness arising during the course of employment. The cover is structured to compensate employees in line with the UAE Federal / Labor Laws. Governed by Chapter 8 of Federal Law No. 1980, the compensation in the UAE shall be a percentage of the death amount depending on the injury. The insurance covers permanent disability benefits as well.Other Types of Small Business Insurance: You might want to know about these three additional small business insurance types.
- Directors and Officers (D&O) Insurance. This type of liability insurance policy is accountable for the decisions made by key persons in the insured company including directors and officers and board members. In case they are sued by employees, vendors, investors or customers for alleged wrongdoing in managing the company, the provider of D&O insurance will bear the legal expenses incurred.
- Inland Marine Insurance: Inland marine insurance provides coverage to products and materials as well as equipment that are being transported on land by truck or by train. In case the property gets damaged, lost or stolen, your insurance company will pick up the tab for the losses incurred in the situation.
- Product Liability Insurance: If you belong to a product manufacturing industry, product liability insurance can have your back during hard times. Product liability insurance covers claims and lawsuits that a company’s products caused injury or property damage.
We can help!
Whether it’s deciding a name for your business, finding the best location for your company inception or choosing the best business insurance, it takes a lot of research and effort. As an entrepreneur you have tons of things to deal with and falling short of time to study about your business needs and find the best solutions to them is pretty understandable. It only makes sense to hire an experienced business setup consultant or management consultant such as Adam Global to help you in taking big little decisions. Just like an insurance company handles the unpleasant incidents on your behalf, our qualified Dubai business advisors help you in figuring out what is best for your business. Because we are experts in the field and known for providing end-to-end solutions to any sort of business-related needs. From registering a company in Dubai to scaling up your business to accounting & bookkeeping services in UAE to making you VAT ready, Adam Global Dubai has you covered! To know how we can help you schedule your first free consultancy with us today.