Business insurance is important to any business in any country. Such is also the case in Hong Kong. The forms of business insurance which are available in Hong Kong help all companies based there to operate without the risk of suffering severe losses against which they are uninsured.
Definition of Business Insurance
Business insurance is a type of coverage which is used to protect the operations of a business from potential risks. Several factors bring about circumstances which require a business or company to use business insurance. Once the company has taken this step, adequate business insurance will enable both the management and others operating within the company to proceed with confidence. A business must consider factors such as environmental conditions that might lead to a financial loss. Business insurance provides coverage against losses of all types. Such losses may be caused by natural calamities, rival companies, employees’ negligence, theft, or fire, among others. In Hong Kong, among the most prominent types of business insurance are workers’ compensation, business auto insurance, and general liability insurance.
The specifications of workers’ compensation require the business to protect its employees in case of any disability or injury suffered while on the job. Workers’ compensation is also advantageous to the business as it will protect the business from lawsuits from the affected family or individual as long as the cause was not an employer’s negligence.
Business auto insurance applies to all motor vehicles owned by a company. It is a requirement that all vehicles must be covered by adequate insurance.
General liability insurance is also vital as it will help in protecting the company or business if an employer, employee, product, or service causes damage to a third party.
Importance of Business Insurance
Business insurance in Hong Kong is important because it serves as a backup plan for the management of the company. Business insurance provides safety and security for a company. Many business owners have a fear of the unknown with regard to the business operations of their company. Business insurance therefore prevents businesses from operating in uncertainty and with little or no confidence. Thus, insurance provides much support to aid in reducing uncertainty within business activities. Therefore, insurance provides stability for any business.
Types of Insurance in Hong Kong
There are many types of insurance in Hong Kong. One of the most important is vehicle insurance. Vehicle insurance is a requirement by law. It is required that a third party must be insured. In a situation where one causes damage to the third party, this type of insurance is required.
Personnel insurance serves to cover both an employer and a company’s employees alike. Health insurance policies include fees for hospital and medical expenses. The primary health insurance schemes, however, do not cover dentistry services and treatments.
Life insurance is offered to all in Hong Kong. Younger individuals will receive more affordable life insurance than older and less healthy people. Life insurance is an investment that will ensure that should the insured person die, the person’s dependents will not remain in turmoil. In some instances, the insured person can reclaim a certain amount of money even while still living.
Employee’s compensation (EC) is mandated by Hong Kong’s laws. It is usually the first form of insurance that any employer or business owner must understand and implement. EC is meant to protect workers while they are at their workplace. It also offers protection to a business when a staff member suffers an injury while working. Failure to protect a company with an EC certificate will cause its owner to be fined HK$100,000 or jailed for two years. Small enterprises and start-up companies might be faced with challenges when purchasing this EC as they might not know about the differences between business and personal activities, especially when the business in question is a home-run company. Nonetheless, the government of Hong Kong remedies the situation by providing EC coverage under the Employees’ Compensation Insurance Residual Scheme Bureau.
Professional indemnity (PI) is a form of business insurance which protects a business or company against any legal action which may be brought against a company or its staff members. It protects against claims that have been raised against the company. Such claims include those about misleading or inadequate advice or information, services provided, actions that cause losses to the company and its staff, or actions that cause losses to suppliers. PI can help business owners pay for all the expenses resulting from legal forces and any damages from claimants. However, PI is not mandated in Hong Kong’s constitution. Despite this fact, some industries require their businesses to purchase PI for registration purposes. The businesses which require PI for professional operations include business consultancies, fitness companies, engineering companies, private education providers, IT companies, and medical companies.
Property insurance allows a company to insure its assets from a loss which it might face during its operation process. Property insurance also protects the building from which the business operates. It therefore implies that when the building, including its assets, suffers damage from external events, the property insurance will compensate the company for such losses.
Business interruption insurance protects a company or business against losses which might occur as a result of disruption of business from its normal operations. It is essential because in Hong Kong, extreme weather conditions can tamper with transportation, thus delaying deliveries or supply. In such cases, the disruption insurance will provide financial support until the disruption period passes.
Cyber insurance also exists in Hong Kong. Since most companies carry out business activities online, these companies ought to have a form of insurance which will compensate for any losses that may have resulted from acts of cybercrime. Companies which are at risk of incurring such losses are those who conduct most of their business activities online. This is especially true of businesses that handle many transactions and payments online. The insurance also protects personal and sensitive information so that no one can interfere with such information.
Benefits of Business Insurance in Hong Kong
There are several benefits resulting from business insurance in Hong Kong. One of the most important of these benefits is the spread of risks. When a business decides to purchase business insurance, it spreads its risks to the insurance company. The insurance companies
have a pool of funds from which the affected parties will be compensated. Therefore, the business owner will not have to bear all the possible risks of the business alone.
Business insurance also ensures the continuity of a business. When an incident which would ordinarily cause a severe loss affects the business, the insurance which has been purchased will protect the business and restore the business to its initial position, allowing it to resume business operations from the position where it had previously been.
The business insurance field is very competitive in Hong Kong. It is therefore advisable that business owners find a broker who has vast knowledge in the field to provide them with information about the best possible insurance to suit the company’s policies and needs. Since there are various types and reasons for the acquisition of insurance in Hong Kong, one should make an informed decision and consider the budget and reasons for purchasing insurance before doing so.
Business Insurance in Hong Kong FAQs
All business owners in Hong Kong are expected and advised to purchase business insurance. Nevertheless, an insurance company can terminate an insurance contract in case of any misinformation or any other problems which may arise during the insurance period. However, those who have their contract terminated are still allowed to subscribe to another insurance cover with either the same or different company. This is because there are no legal barriers preventing anyone from purchasing business insurance cover Hong Kong.
According to the latest statistics, the average cost of medical insurance in Hong Kong is US$12,585. When compared globally with other neighboring countries, Hong Kong ranks in the world in the rankings of countries with the most expensive international global insurance. It only ranks behind the United States in this statistic. This also means that insurance in Hong Kong is the most expensive among all countries in Asia. This also proves that business insurance in Hong Kong is much more expensive than business insurance in neighboring countries.
It is possible to receive business insurance in Hong Kong regardless of the type of business which is being run. The premiums, however, will differ according to the level of risk involved and the size of the business covered. It is not easy for start-up businesses to access insurance unless they choose to search for a better deal that will suit their financial position.