Renovation Insurance and Risk Management: A Beginner’s Guide
The Singapore renovation industry is competitive. With every new HDB new estates developed, there is a demand for renovation services.
Like every industry, you also face industry-specific risks in the renovation business.
So what are these risks and what can you do to manage them?
In this article, we will share some of the common renovation industry risks. We will also show you how insurance can help to manage these risks.
Risks and Insurance Needs for the Renovation Industry
Causing Injury or Damages to Member of the Public
Renovation involves the use of heavy materials and tools. It is also labor-intensive.
It is inevitable when your employees make mistakes. Certain mistakes can cause long-lasting damage to others and your firm.
Imagine this scenario:
Your employee is fixing the windows for your client. The window is not secured. It dropped from a 10th storey high apartment. The falling window hit someone on the ground floor.
This mistake might cause death to the poor person.
Even if it hits no one, it might also cause property damage. The unsecured window might hit cars or shelters.
The question is:
Who should be responsible? The owner of the house? Or your renovation firm?
In most cases, the victim will file claims against you, the renovation firm. You have the responsibility to maintain the standard of your work.
You also could not push the costs to your employees. This is the risk you are taking running a renovation firm.
But, there is one thing you can do to manage this risk:
Buy a public liability insurance.
What is public liability insurance?
What happen when someone suffers injuries as a result of your business activities?
Public liability insurance protects your business when that happen.
This insurance covers the damages and legal expenses when you face such claims.
We recommend all renovation and specialties to at least cover for public liability. Please contact us for a no-obligation quotation.
Employees suffer work-related injuries
All Singapore employers have to follow the Work Injury Compensation Act (WICA). Under WICA, employees can make claims for work-related injuries and illness.
The claims are:
- Wages during the medical leave due to work-related injury or disease
- Medical expenses incurred
- Lump sum compensation for permanent incapacity
Work-related injuries are common in the renovation industry. Employees have the rights to file the claims against you.
This is where a Work Injury Compensation (WIC) insurance will help you.
How Can WIC Insurance Help Your Renovation Business?
A WIC insurance helps you comply with the WICA requirements. The insurer will indemnify your costs when your employees make WICA-related claims.
WIC insurance is compulsory under the following situations:
- You have employees doing manual work; or
- You have employees who are doing non-manual work and earn less than S$1,600 per month.
Employees stealing cash from the business
What is your cash collection process? Most renovation business charges a deposit upon confirmation. Then they will collect the balances upon completion.
While many customers pay using cheque, there are still customers who prefer paying cash.
This means that your employees will have access to these cash after collection.
What is stopping them from taking the cash for themselves?
If you have poor internal controls and record keeping, you might not even realise this.
We face manpower shortages in Singapore. I am sure you face the same issue in the renovation industry. It is difficult to get competent and honest employees.
Dishonest employees can be damaging to business. One way to manage this risk is using fidelity guarantee insurance.
How Fidelity Guarantee Insurance Can Help You?
Buying fidelity guarantee insurance indemnifies your losses arising from dishonest employees.
It is not possible for you to stop your employees from being dishonest.
The next best way is to cut your losses when that happen. Fidelity guarantee insurance minimizes your losses.
Road Accidents and Damages to Your Commercial Vehicle
Chances are, you have a commercial vehicle.
You need to send your employees to your client’s apartment. You also have to deliver the materials to your clients.
What if your commercial vehicle met with an accident?
First, you will have to pay for third-party damages if your employee is the cause.
Second, you also have to pay for the repairs for your commercial vehicle.
Your commercial vehicle is important to your business. Repairs expenses can put a big dent in your cash flows. You should not leave it to chances.
In Singapore, commercial auto insurance is compulsory. But this only applies to third-party coverages.
We recommend that you should get comprehensive coverage for your commercial vehicles.
Damage or Thefts to Office Contents
Most renovation firms in Singapore has a well-furnished studio. Can you imagine if there is a fire?
All the costs of furnishing your studio have gone to waste. Not only that, but you also lost your place to host your potential clients and showcase your work.
One way to deal with this is to buy an office insurance.
An office insurance indemnifies your losses to your office and office contents. The 2 most common cases are fire and theft.
Considerations in Your Risk Management Program
The above recommendations are guidelines. Every business is different. You should also consider the following factors in your risk management plan:
Do you have a sound internal controls and financial records keeping system?
Internal controls are vital to every business. If you keep your financial records clean, you will prevent your employees from stealing.
Even if you cannot prevent, you would have detected it before it is too late.
Prevention is always better than cure.
It is better for you to start implementing controls than face the big financial costs later.
If you have good internal controls, you might not find fidelity guarantee insurance worthwhile.
Do you have a well-documented training and work processes for your employees?
You can prevent most of the employees’ mistakes with training. Start by identifying high-risks areas. Then assign more senior employees to do the work, and another person to verify.
With a good work processes, you can reduce the mistakes made by your employees.
Your Business Structure
If you are operating a sole proprietorship, you do not need a WIC insurance.
In this case, we recommend you to buy a personal accident insurance. If you suffer a work-related injury, you can make insurance claims.
For partnerships and limited liability companies, it is better for you to buy a WIC insurance.
Certain projects need the contractors to have public liability insurance. These projects are usually private condominiums.
Public liability insurance is not a choice if you want to serve clients staying in a condo.
About QBE Renovation Protection Package
Do you need an insurance to protect your renovation business?
Why not consider QBE’s Renovation Protection Package?
This package includes coverages for 3 major risks:
- Material Damage: Covers unforeseen and sudden physical loss or damage to property insured necessitating repair or reinstatement;
- Third Party Liability: Covers accidental bodily injury and/or accidental loss of or damage to property belonging to third parties arising from the contract works; and
- Work Injury Compensation: Covers employers’ obligation for employees’ personal injury by accident in the course of employment under WICA.
You can find out more about the QBE Renovation Protection Package with the product brochure.
Like every industry, there are risks involved in the renovation industry. With proper controls, training, and insurance, you can concentrate on more value-adding activities.
Insurance is one of the most misunderstood business expenses. You only see the purpose of it when you need it. Do not let your business be a victim of these insurable risks.
Do you want to understand more about how insurance can help you? Please contact us for a no-obligation consultation. We love to speak to you!