Budding entrepreneurs in the UAE are faced with an exciting ecosystem, with the country home to a thriving, diverse economy. However, even optimistic business owners need to hedge their risk for potential future problems. In this, insurance is key.
Insurance types “vary according to the business, type, nature, complexity and location where the business is operating,” Howden Insurance Brokers’ chief executive officer Sajith Kumar told Arabian Business.
“Insurance is a mechanism of transferring the risk of the business to an insurance company at a premium. The landscape of risk is fast changing and the business environment has to be up to speed in terms of how to handle the risk,” Kumar said, adding that businesses must not only take important decisions to run the business successfully, but also to ensure that the business is managing its risks properly.
“Insurance is an important tool to handle risks especially from uncertain events, and it is one of the foremost things to keep in mind while starting or doing a business,” he said.
Some of the more common and important insurance that one should definitely consider are given below:
1. Property Insurance
Property insurance covers “loss or damage to building, machinery, stocks and other fixed assets,” Howden’s Kumar explained.
This type of insurance provides financial reimbursement to the owner or renter of a company and its assets, in case there is damage or theft. However, under property insurance, there can be several policies such as renter’s insurance, flood insurance, earthquake insurance and homeowner’s insurance.
According to Investopedia, “personal property is usually covered by a homeowners or renters policy. The exception is personal property that is very high value and expensive—this is usually covered by purchasing an addition to the policy called a “rider.” If there’s a claim, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to fix the problem.”
Property insurance often covers damage cause by fire, natural disasters, vandalism or theft.
2. Business Interruption Insurance
The Business Interruption Insurance, “is a very innovative insurance covering the loss of profit following a loss or damage to the property causing interruption,” Kumar explained.
The type of insurance coverage replaces the businesses income lost due to disaster such as fire or natural causes.
However, business interruption insurance is not sold separately but is added either to a property or casualty policy. Sometimes, it is also included in a comprehensive package policy as an add-on or rider.
This type of insurance also covers operating expenses, allowing the business to relocate to a temporary location if necessary, as well as payroll, taxes, and loan payments.
3. Commercial General Liability Insurance
This type of insurance “is more a third party liability, intended to cover the liability claims arising out of negligence resulting in third party bodily injury or property damage,” Kumar said.
The Commercial General Liability Insurance comes in two policies — a claims-made policy and an occurrence policy.
The former covers claims regardless of the details of the event whereas the latter covers claims in which an event must take place during a particular period.
However, this type of insurance does not provide protection for intentional damage, or accidents that involve cars, aircrafts or ships/boats.
Companies also have the benefit of adding other companies or individuals they contract with as an “additional insured”.
4. Vehicle Insurance
The Vehicle or Auto Insurance “covers motor vehicles of the business against own damage or third party liability,” Kumar said.
The Auto Insurance “is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy,” the Insurance Information Institute said.
Auto Insurance often provides coverage when a car has been damaged or stolen. The insurance also covers medical expenses for treating injuries, rehabilitation and some times lost wages and funeral expenses.
It [Auto Insurance] also covers the individuals “legal responsibility to others for bodily injury or property damage.”
5. Money Insurance
The Money Insurance “covers money in transit, safe or in premises,” Kumar said. In Money Insurance, the company is protected in case it encounters theft or robbery of money carried by the individual or authorised persons when in transit or within business premises.
Money includes cash, bank drafts, cheques, postal orders, currency notes, treasury totes, and current postage stamps. However, they can vary from policy to policy, depending on your insurance broker.
6. Fidelity Guarantee Insurance
Fidelity Guarantee Insurance covers “dishonesty risks of employees,” Kumar said.
This type of insurance covers direct financial losses due to dishonesty by a company’s employees either alone or in collusion between between the insurer and the customer, such as fraud.
Theft or fraud can also be in the form of cyber attacks, credit card forgery and through destruction of disappearance of property.
7. Workmen’s Compensation Insurance
The Workmen’s Compensation Insurance “covers employees against work related accidents or occupational sickness as per the law of the country,” Howden’s Kumar explained.
The insurance covers medical expenses and loss of wages from any kind of sickness or accidents that could occur during the course of employment.
According to the UAE Federal Law No.8 of 1980, it is mandatory for employers to pay compensation to the employee(s) in case of accident arising out of and in the course of their employment.
8. Medical Insurance
Medical or Health Insurance is “for employees and their dependent members,” Kumar said. It is the most common insurance policy opted by businesses in the UAE and it is important to maintain the well-being of employees.
However, like Kumar said, the insurance is extended to direct family members such as the individual’s spouse and child(ren).
The Medical Insurance contract is usually an agreement that lasts for a year and renewed annually. During this period, the insurer will be require to pay for specific expenses related to illness, injury, pregnancy, or preventative care.
9. Cyber Protection covers
Companies must be protected against cyber attacks “as the risk of cyber loss are increasing,” Kumar said.
Recently, Spinneys fell victim to a ransomware attack, causing many companies around the UAE to double down on their cyber insurance policies, according to experts who spoke to Arabian Business earlier.
Cyber Protection covers offer companies access to highly experienced experts to nullify the threat as quickly as possible and help mitigate disastrous consequences, without incurring drastic loss.
Additionally, this type of insurance also covers the costs of reinstalling hardware and software.
10. Directors and Officers Insurance
“Covers [this insurance] the directors and officers against wrongful decisions,” Kumar explained.
The insurance covers directors and officers or their company, if sued. However, these insurance claims are paid to cover losses incurred from the lawsuit including legal defense fees.
According to Investopedia, “Side A coverage covers directors and officers for claims where the company refuses to or is financially unable to pay for indemnification. Side B coverage covers the losses of directors and officers when the company does grant indemnification. Side C coverage, also called ‘entity coverage’, extends coverage for the corporate entity itself.”
These insurance policies can vary depending on company needs and exposures, Kumar said, adding that “the list is not exhaustive”.
Kumar said that it is best recommended “to get the help of professional brokers to assess your risk and customise right solutions for you. Brokers are clients representatives and are expected to protect the clients interest.”
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