guide to different type sof corporate insurance plans in malaysia

6 Essential Types Of Small Business Insurance In Malaysia

Considering the numerous SME-friendly insurance packages available to Malaysian businesses, it’s rare for a business today to truly be ‘too small’ to be worth insuring. 

white wooden house on green grass field under blue sky during daytime
Of course, there are always exceptions.

And yet, an article in 2022 by Malaysian news portal The New Straits Times reported that 80 per cent of SMEs were underinsured, a finding corroborated by another article from Q4 2023 in which the percentage of underinsured SMEs was said to be 85%!

The article stated business owners preferred prioritised revenue-generating activities – but unless a business is make tens of thousands in monthly profit, it’s not about to out-earn an accident.

And so in this post, we’ll be covering 

  • six types of business insurance SMEs should know of
  • the tax-deductible status of insurance policies, and
  • a textbook story of why insuring a business is as crucial as growing it

Let’s begin!

6 key small business insurance plans

From the many types of small business insurance policies, we’ve listed down six with the most relevance across industries:

  • Employee Benefits Insurance
  • Key Person Insurance
  • Professional Indemnity Insurance
  • General Liability Insurance
  • Product Liability Insurance
  • Premise / Property Insurance

1. Employee Benefits Insurance

An employee benefits insurance plan is a health and protection package that a company buys for its workers and can include various benefits as the employer sees fit, including:

  • Conventional healthcare such as including doctor visits and medical procedures
  • Dental care such as routine check-ups, cleanings, and treatments
  • Prescription medication coverage to help with the cost of necessary medications
  • Vision care including eye exams, glasses, and contact lenses
  • Mental health services such as therapy or counselling sessions

It’s meant to address gaps in the government-required Social Security plan, and is also undeniably an effective tool to attract and retain talent.

Employee Benefits Insurance vs SOCSO

Many employers believe SOCSO provides their staff with adequate protection.

‘Adequate’ is a relative term, but we can all agree it’s no synonym for ‘complete’, and here are some key differences between SOCSO and a typical employee benefit plan.

InsuranceEmployee Benefits InsuranceSOCSO
RateBased on the chosen policyBased on employee’s salary
CoverageBasic with additional payment for extraComplete with no extra charges
Area of FocusSickness and hospitalisationWorkplace accidents
Paid byEmployerBoth employer and employee
Protection LevelAll employees equally protected by group policyEmployees have varying levels of protection based on salary

The biggest advantages a benefits plan has over SOCSO is the equal protection afforded to all employees, as well as coverage for hospitalisation and treatment for illnesses, notable gaps in SOCSO’s offering. 

Often, having both is the best way to fully protect your people from untoward incidents, and for that reason, MISHU recommends this insurance plan to any business that employs even one staff member.

2. Key Person Insurance

Key person insurance is a life insurance policy that insures the life of someone of high value to the company such as a C-suite executive, a top earning salesperson, or senior manager / leader. 

Should this key person pass away or become permanently disabled, the business is compensated to help make up for the loss in potential revenue. The money received can be invested into recruiting and training a suitable replacement. 

3. Professional Indemnity Insurance

Professional Indemnity insurance covers expenses of legal proceedings and compensation owed to customers who suffer financial losses due to mistakes or negligence by the business owner or employees.

Even the most experienced and knowledgeable among us eventually make mistakes, and these mistakes sometimes lead to significant losses for clients. Professional indemnity insurance protects not just your businesses and employees,  but the clients that experience financial loss. 

4. Product Liability Insurance

Product liability insurance covers the financial burden of lawsuits and legal actions resulting from accidents caused by products sold by your business.

Despite your best efforts to ensure your products meet industry standards, accidents can still happen. Product liability insurance gives your business protection for bodily and property damage in these situations.

5. General Liability Insurance

General liability insurance safeguards your business from lawsuits due to bodily harm or damage to property suffered by third parties (not part of your business) on your premises or during the course of your business operations.

Accidents are inevitable, and having general liability insurance ensures your business is covered whenever they occur. This peace of mind allows you to focus on running your business without worrying about potential setbacks due to unforeseen incidents.

6. Property Insurance

Property insurance shields owners and contents of a building from damage caused by weather-related disasters or malicious acts. It also covers third parties who get injured while on the owner’s property.

Insuring the premises can be crucial in case of temporary closure leading to income loss, as well as for covering repair and replacement expenses. 

Are insurance premiums tax deductible?

In most cases, the answer is ‘yes’, insurance premiums are considered a tax deductible expense so long as they:

  1. Are incurred exclusively in the production of income (cannot be to protect claims against personal assets).
  2. Do not come with a ‘surrender value’.
waving white flags to show surrender value of an insurance policy which invalidates its tax deductible status

The surrender value in an insurance policy refers to the amount of money that a policyholder receives if they terminate or ‘surrender’ their policy before its maturity date, forefeiting the benefits of the policy in exchange for a cash value.

The most common type of insurance that comes with surrender value is Keyman Insurance, though you should always consult your insurance agent to be certain.

A natural disaster no one could predict

Did you know that the 2012 – 2022 floods in Malaysia have a dedicated Wikipedia page?

The General Insurance Association of Malaysia (PIAM) recently reported that the historic natural disaster caused total losses of RM622.4 million across various business sectors, including premises, vehicles, and manufacturing equipment.

image of floowing in malaysia to underscore importance of insurance for smes

It was a truly terrible time to live on the East Coast.

Authorities have described the event as a ‘once in a century disaster‘ that statistically only has a 1% chance of occuring on any given year.

Now imagine if you were a business owner who dismissed the 1% chance of disaster and neglected to insure your business. Years go by with no cause for alarm, affirming the belief that business insurance is an unnecessary expense.  

Instead, you invest in extra hands, better equipment, and renovations to grow your business.

Then one day you no longer have a business. 

No state was safe.

With the right insurance packages for a small business, you can mitigate and even offset your losses.

With no business protection plan and no safety net to catch you as you fall, it will be as if the years you’ve poured into your business never happened. For many business owners at the time, this wasn’t a hypothetical situation

Good entrepreneurs learn from their mistakes, but great entrepreneurs learn from the mistakes of others.

If your business isn’t insured as yet, let’s get that sorted!

Let MISHU suggest insurance plans for your SME

Co sec Manager Fenny

MISHU’s network of qualified insurance agents regularly assist SME owners from various industries with finding the perfect policies to protect their business from the unexpected.

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