COVERED: A fire burns down the Joos Kitchen Cupboard factory in Stikland, Bellville, Cape Town. Comprehensive insurance is necessary for small businesses in cases of fire, earthquakes and other natural disasters Picture: SHELLEY CHRISTIANS

" 'The reduction in turnover and a possible increase in cost of working are compensated'

Comprehensive insurance may not be as expensive as you fear and there are things you can do to reduce your premiums.

We were given some tips by Santam's commercial division head, Louise Pharo, who said there was a bare minimum of cover you should have in any short-term insurance policy for your small business.

"First, cover for your buildings, your stock in trade and equipment against losses as a result of a broad range of perils including fire, explosions, earthquakes and storm damage (commonly known as 'fire and perils')."

"Second, office contents cover which will insure all normal office equipment against fire, explosions, earthquakes, storm and burglary."

Theft cover protects you against a loss of stock in trade and equipment following a burglary or hold-up at your business premises, she said.

You should also have cover for interruption of business, in the event of your business suffering material damages.

"If you can't maintain your normal turnover as a result, the reduction in turnover and a possible increase in cost of working are compensated," said Pharo.

If you receive cash or other forms of money, your policy should cover losses, and it should include "business all risks" cover, which provides cover for specified items, particularly when they are not used on your business premises. "Motor vehicles owned by the business should be covered, as well as electronic equipment such as computers and other specialist electronic equipment against most damage," Pharo said.

Finally, don't forget public liability cover. "More and more people are becoming aware of their rights. Make sure you have adequate cover if somebody sustains injury on your premises or suffers a loss or damage as a result of a product you manufactured or work that you performed."

According to Pharo, since the ongoing success of your business will depend on how well your company handles sudden losses, the cost of your premium should not be the only consideration when weighing up insurance options.

"First, don't underestimate the importance of a good broker - someone you can trust who has experience in business insurance and can help tailor a package that will suit you. Second, make sure that any claim will be handled quickly and properly. Investigate how easy it is to lodge a claim with various insurers - can you do so via phone, fax or e-mail? Also, ask how long they usually take to pay up."

Don't forget to play your part.

"Once you've arranged your insurance, it's easy to forget about it. But businesses change and so will your insurance requirements, so it's essential to review your insurance at least once a year or more often if your business is undergoing rapid change. It's no use paying a premium if the amount covered doesn't reflect the real investment. Also, circumstances that can affect your premium might change. If, for instance, your premises become more secure, your premium can be lowered, so it's important to regularly review your insurance," said Pharo.

What factors affect your premium? Typically, the location of your business, the nature of its premises and the type of business will determine the way your insurer perceives the risk. "Do you work from home, a shopping centre or business park? Is your business in a city, a town, suburb or industrial area? What is the physical condition of the buildings from where the business is conducted? Also, hazardous occupations naturally attract a higher premium," Pharo said.

"We do reward clients who manage their risk exposures adequately. An office park usually has controlled access such as security staff or access-control booms and burglar alarms and has strict requirements on fire extinguishers. A hairdressing salon in a shopping centre will carry a different rate than a simular type of business in a new, unbuilt area," she said.

"We price a risk according to statistics built up over many years, include things like the overall claims experience in any particular area. But, more importantly, we price the risk according to the client's risk profile - we take into account claims history, the type of risks insured by the client and importantly, what protection that client has invested in to assist in protecting their assets," Pharo said.

Other types of insurance cover you can consider

• Glass: damage to shop fronts and sign writing at your premises could be costly to repair. Accidental damage to the glass would be covered;
• Fidelity guarantee: this is where the business insures itself against losses as a result of employee fraud;
• Accounts receivable: a business can insure possible losses if, for example, the business is destroyed in a fire, no records of accounts have remained and the business is unable to establish the amount due to them;
• Goods in transit: many businesses transport and deliver goods produced or sold. Make sure that you are covered in the eventuality of accidents or hijackings that could damage or destroy the goods being transported.