Most business insurance is optional. A few kinds are compulsory, and a few more are effectively compulsory because a contract, a landlord or a lender requires them. Knowing which is which is where a business should start.
This page separates the statutory obligations from the commercial decisions, and sets out what actually determines whether a claim pays.
Eligibility Requirements at a Glance
What is required, and by whom.
- COIDA registration — compulsory. The Compensation for Occupational Injuries and Diseases Act 130 of 1993 requires employers to register with the Compensation Fund and pay annual assessments
- UIF registration — compulsory for employers under the Unemployment Insurance legislation
- Motor third-party cover — not compulsory by statute, but required by any credit agreement financing a business vehicle
- Professional indemnity — required by several professional bodies as a condition of practice
- Public liability — commonly required by landlords, event organisers and contract counterparties
- Asset and business interruption cover — commercial decisions, frequently required by lenders where assets secure a loan
- A registered entity with a business bank account, for most commercial policies
- Accurate disclosure of the business activity, premises and claims history
Income and Affordability Requirements
COIDA is the one most often missed. Registration with the Compensation Fund is a legal obligation for employers, and it is what compensates an employee injured at work. An unregistered employer remains liable and can be held responsible for the compensation directly, in addition to penalties. Register with the Department of Employment and Labour and submit the annual return.
COIDA does not cover everything. It covers employees for occupational injury and disease. It does not cover damage to your property, claims by members of the public, or your own liability as a director. Those are separate.
Public liability is the cover most small businesses under-buy. A customer injured on your premises, or damage you cause to someone else’s property, produces a claim not limited by the size of your business. The premium is usually modest relative to the exposure.
Business interruption is what closes businesses. A fire, flood or extended outage stops income while costs continue, and asset cover replaces the assets but not the lost trading. Ask specifically what an interruption policy covers, what triggers it, and what the indemnity period is — those details vary enormously.
Professional indemnity is required by several professions and is a condition of practice for some. Confirm the requirement with your professional body rather than assuming.
Directors and officers cover responds to claims against directors personally. Directors have statutory duties under the Companies Act 71 of 2008 and can be held personally liable, which is a real exposure for small company directors as much as large ones.
Credit and Financial Requirements
Non-disclosure is why claims fail. Insurance operates on the duty to disclose material information, and an insurer may repudiate a claim or void a policy where a material fact was not disclosed. Business activity, premises, security, previous claims, stock values and who works on site are all material.
Under-insurance triggers average. Where assets are insured for less than their value, many policies apply an average clause reducing the claim proportionally. Insuring a million rand of stock for half a million does not halve the premium and pay half a claim — it can reduce every claim by half. Review sums insured annually.
Get the excess structure in writing, per section of the policy. It determines what a claim is actually worth.
Security requirements are conditions, not suggestions. Where a policy requires an alarm, specific locks, a linked response service or a safe, a claim can be rejected if those were not in place and operating. Read the conditions and comply with them.
Insurers and brokers are regulated by the Financial Sector Conduct Authority, and advice is given under the Financial Advisory and Intermediary Services Act 37 of 2002. You are entitled to written disclosure of how a broker is remunerated. Confirm any provider is authorised before paying a premium.
Disputes go to the National Financial Ombud Scheme, at no cost to you. Ask for any repudiation in writing and keep all correspondence.
Documents and Verification Required
What is needed to arrange cover.
- CIPC registration documents and a company profile
- Certified ID copies for directors, members or partners
- A description of the business activity, premises and operations
- Address and details of every premises, including security measures
- An asset schedule with current replacement values
- Stock values and turnover figures
- Full claims history for the business and its principals
- Employee numbers and payroll figures, for COIDA and liability cover
- Professional registration details, for professional indemnity
- Contracts requiring specific cover, where they exist
How to Apply and Improve Approval Readiness
Start with the compulsory items — COIDA and UIF registration — then the cover a contract, landlord, lender or professional body requires, and only then the commercial decisions.
Use an authorised broker or deal directly with an authorised insurer, disclose everything in writing, and keep a copy of what you disclosed. Review sums insured and the schedule annually, because a business that has grown is usually under-insured.
- Register for COIDA and UIF — both are legal obligations
- Identify cover required by contracts, landlords, lenders and professional bodies
- Take public liability cover — the exposure is not limited by your size
- Ask specifically what business interruption covers and its indemnity period
- Disclose everything material, in writing, and keep the record
- Review sums insured annually to avoid the average clause
- Get the excess structure in writing, per section
- Comply with every security condition in the policy
- Confirm the insurer and broker are authorised by the FSCA
- Escalate a rejected claim to the National Financial Ombud Scheme
Frequently Asked Questions
What business insurance is compulsory?
COIDA and UIF registration are legal obligations for employers. Other cover is either a commercial decision or required by a contract, landlord, lender or professional body.
Does COIDA cover everything?
No. It covers employees for occupational injury and disease. It does not cover your property, claims by the public, or directors’ personal liability.
What is the average clause?
Where assets are insured for less than their value, many policies reduce claims proportionally. Under-insuring can cut every claim, not just large ones. Review sums insured annually.
Why do business claims get rejected?
Most often for non-disclosure of material facts, or for failing to comply with a policy security condition such as an alarm or specified locks.
Statutory registration obligations, policy terms, exclusions and premium criteria are set by the Department of Employment and Labour, the insurers and the professional bodies, and are revised. Confirm current requirements with each and read the policy wording.