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Circle of Protection

ARTICLE BY

  • Dané Barnard
  • Business Development Manager
  • Elevate Life

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Advisers can support entrepreneurial clients by making sure they have all the necessary insurance in place for their SMME.

Small, micro, and medium-sized enterprises (SMMEs) account for more than two million companies in South Africa and represent over 98% of formal businesses. These businesses form the backbone of our economy and bring agility, innovation, and entrepreneurial spirit. However, SMMEs face unique risks and challenges that make insurance a crucial aspect of their risk management strategy.

Business owners and their financial advisers must navigate various insurance options to protect their assets, employees, and operations from known and unknown shocks that could be detrimental to their sustainability. Making informed insurance decisions (with the support of an expert financial adviser) should be a key aspect of their business strategy.

Insurance needs of SMME business owners

SMMEs encounter a range of risks and uncertainties that require specialised insurance coverage. Support from expert financial advisers can be essential in helping understand these needs and putting in place comprehensive protection tailored for their businesses:

Risk cover insurance for business needs: For SMMEs, the loss of a key employee, shareholder, or owner can have a profound impact on the business’s continuity and profitability. Key Person, Buy-and-Sell Cover, and Contingent Liability Insurance provide financial support in the event of the death or disability of vital contributors (directors, shareholders, and management) to the company’s success.

Property insurance: SMMEs often own or lease physical premises, equipment, and inventory critical to their operations. Property insurance covers losses due to fire, theft, vandalism, or natural disasters, ensuring that the business can quickly recover and resume operations.

Liability insurance: SMMEs can face lawsuits from various sources, including customers, employees, regulators, or other third parties. Liability insurance, such as general liability and professional liability insurance, protects against legal expenses and potential settlements.

Commercial auto insurance: SMMEs that use vehicles for business purposes, such as delivery or transportation, require commercial auto insurance. This coverage protects against accidents, property damage, and liability claims related to business-owned vehicles.

Business interruption insurance: Disruptions caused by events such as fires, floods, or supply chain issues can lead to significant revenue losses for SMMEs. Business interruption insurance covers lost income and necessary expenses during downtime, helping businesses survive challenging periods.

Cyber insurance: As businesses increasingly rely on digital operations, the risk of cyberattacks and data breaches has grown significantly. Cyber insurance helps SMMEs mitigate the financial consequences of cyber incidents, including data restoration, legal expenses, and notification costs.

Employee group benefits: Attracting and retaining top talent is crucial for an SMME’s growth. Offering competitive employee benefits, such as health insurance, dental coverage, and retirement plans, can help SMMEs compete with larger enterprises for skilled workers.

As can be seen here, SMME business owners face a multitude of risks that require adequate insurance coverage. Financial advisers play a crucial role in helping entrepreneurial clients identify and manage these risks effectively. By assessing needs, providing education, customising coverage, and offering ongoing support, advisers can empower SMMEs to protect their assets, employees, and future growth. And with the support of quality products, such as Elevate Life’s risk cover products, they contribute to the resilience and success of these vital contributors to the South African economy.

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