SME Insurance – FAQs

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Manufacturer of the product is: MAPFRE Middlesea

MAPFRE Middlesea p.l.c. (C-5553) is authorised by the Malta Financial Services Authority (MFSA) to carry on both Long Term and General Business under the Insurance Business Act. MAPFRE Middlesea p.l.c. is regulated by the MFSA.

Legal advice for SMEs

Studies show we are more than likely to invest in technology or operational and accounting advice, rather than in legal assistance. This is a terrible mistake that may lead us to situations of trouble, sometimes even facing economic sanctions, due to ignorance of the law. Authorities do not expect SMEs to be legal experts, but we may be required to look for assistance in case of doubt. Thus, having legal services collaborating with our SME may be almost mandatory if we want to have flawless operations regarding our administrative, labor or legal management.

First of all, the way in which we may access to legal advice may vary depending on the magnitude of our enterprise. In this sense, bigger companies are able to integrate an autonomous legal department in their structure due to their capacity. Nonetheless, smaller companies may look for external services specialized on legal assistance, so that they do not have to invest in human capital, premises, materials, etc. Plus, their needs may be more sporadic and occasional and those services may only hired when needed.

These are the legal services most demanded by companies:

  • Claims and complaints;
  • Work accidents;
  • Claims for wrongful terminations; and
  • Legal analysis and research.

In this manner, SMEs usually require this legal support when they find themselves in one of the previous examples, but they do not take serious measures to prevent all the symptoms of those incidents. Hence, most of them look for lawyers when it is too late or there is little to do, and the situation can get very harsh.

It is known that many SMEs look for official documents on the Internet, from where they download everything they need (employment contracts, for instance), with no professional supervision at all. This may lead to real dangers with legislations.

All things considered, it is highly recommended to look for legal advice services and assistance if we are looking to hire an insurance policy to protect our SME. Most of them offer real counseling and may save us from unwanted conditions in case we find ourselves in trouble. Thus, it is an easy way to ensure the wellbeing of our company as well as our peace of mind.

How can I know if my business is a SME?

According to EU, 9 out of every 10 enterprises is a SME and SMEs create 2 out of every 3 jobs. It sounds like SMEs are very common, but do we really know what they are?

We have to check these 3 things to see if our business meets the criteria:

  • Staff headcount; and
  • Annual turnover; or
  • Annual balance sheet total.

SME stands for small and medium-sized enterprises; those are companies employing fewer than 250 persons, and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro, in EU standards. Thresholds, therefore, are established as it follows:

  • Micro enterprises:
    • Headcount: <10
    • Annual turnover: <2 million euro; or
    • Annual balance sheet total: < 2 million euro.
  • Small enterprises:
    • Headcount: <50
    • Annual turnover: <10 million euro; or
    • Annual balance sheet total: < 10 million euro.
  • Medium-sized enterprises:
    • Headcount: <250
    • Annual turnover: <50 million euro; or
    • Annual balance sheet total: <43 million euro.

Headcount refers to full-time, part-time, temporary and seasonal staff (except apprentices and those on parental leave), although national legislation applies differently in every country.

Annual turnover is the result of calculating the income we received during the year in question from the sales of products and provision of services after deducting any rebates. It does not include VAT or indirect taxes.

Annual balance sheet total refers to the value of our main assets.

Given their relevance to the Union’s economy, SMEs are a priority for the European policy; a policy conceived to improve the business environment by avoiding too stifle conditions and regulations. Therefore, no wonder SMEs represent more than 85% of new job creation in Europe.

According to the EU, there are three categories in which we can class a SME. These categories correspond to a type of relationship that an enterprise may have with another:

  • Autonomous: this is the case of completely independent enterprises or those with one or more minority partnerships, each one less than 25%.
  • Partner: this is the case of enterprises having holdings between 25% and 50% with other enterprises.
  • Linked enterprise: this is the case of enterprises having holdings exceeding 50% of the threshold.

This is a quick guideline for SME. However, support is still available with financing measures and support programmes for enterprises that do not qualify as SME.

What do I need to know as a SMEs?

Theory is amazing, but sometimes difficult to put into practice. We thought we knew everything about business, but we still find some problems when trying to integrate theory and practice with our SME. SMEs usually face very similar obstacles, and all of them are solvable if we take the right measures.

  • Most of the mishaps SMEs find have to do with planning. Sometimes we think we do not need an exhaustive plan, for there is little to be studied. But, however, we must take every aspect that may have an influence on our activity into consideration and write everything down so that we do not forget about anything. This is particularly important when related to the stock or inventory, for we must be aware of our bonded goods at all times.
  • Getting familiar with all the tendencies in our market. No matter if our business is not a multinational corporation, we must know what is going on out there and how we can take advantage of it.
  • Being aware of our limits will help us determine our objectives and strategies and avoid blurred goals and wanderings around our real aims. Defining those limitations, and therefore, managing our resources in the most optimal way will save us a lot of time, money and effort.
  • This last point also works with production. Getting and using tools to foresee the differences in production will ease the adaptation according to our expectations and predictions.
  • Sometimes we sacrifice optimizing our electrical devices, because we think we may get along with what we already have, but updating our technology may improve much our management. Innovating and being done with the last software available for business is always a safe bet.
  • Setting warnings and reminders for payments, billings and collections will assure us not to miss a thing!
  • There are many governments and private entities that subsidize and grants entrepreneurs and SMEs: this is not surprising, for they are the backbone of many economies and they represent the 85% of employment in the European Union. Being familiar with regulations and legislation about our small enterprises may save us a lot of money.

These are some guidelines we may follow to get the best of our business. If we take care of the small things, improving will be much easier.

What does an all-risk insurance include?

Setting up a business takes a lot of time and effort. The worst thing that could ever happen to our enterprise is precisely that something happens. That is why we may want to protect it from any event that may affect our activity and we want to get an insurance all-risk. But will an all-peril insurance solve all of our problems?

Every insurer is different from the rest and every company will offer coverages that may vary from one to another. That is why we must be very exigent with our SME insurance and the services they provide in case of an event, for even all-risk policies have their own restrictions.

Nonetheless, they offer the most comprehensive type of coverage available and its price, in consequence, will be accordingly higher than any other policies. For this reason, we may want to analyse other types of coverage if the probabilities of claiming are very unlikely.

But if we finally bet for the all-risk coverage, our goods, such as our property, machinery, furniture, and stock, will be protected from adversities. It will be the case too of our third-party liability, even if our activity is interrupted by an accident; damages to our stock when being transported are also covered.

In sum, all-risk insurances may cover:

  • Basic protection to material loss or damage, in case of fire, explosions, natural catastrophes, water damages, authority interventions… for buildings and vehicles.
  • Work accidents.
  • Food when refrigerated.
  • Theft and burglary.
  • Debris removal.
  • Professional fees.
  • Second office if needed.
  • Electrical damage.
  • Leakings.
  • Small remodellings.
  • Replacement of documents.
  • Salvage.
  • Etc.

However, these features are flexible and insurers will assist us and help us with the options we can choose carefully those for which we are particularly vulnerable due to the nature of our enterprise. Depending on the coverage we buy, the premium will be higher or lower: for broader covers, higher premiums.

This may be the ideal option in case we wish to protect our business and avoid headaches while choosing. Nevertheless, analyzing our needs in advance will determine the features we need to cover, and will lower the price if we forget about those conditions we do not need.

What is a fixed asset? And a current asset?

Fixed assets form the necessary infrastructure of a company, involving goods of either real or financial nature. The term refers, therefore, to concrete but also to more conceptual elements. Since their character is infrastructural, they are meant to remain beyond the current fiscal year, because they are intended to endure in a permanent, long-term state.

A fixed asset may be classed in three main groups, depending on its nature:

  • Intangible / immaterial asset: Those assets cannot be touched, although that does not mean they are not valuable. This is the case of computer software, ongoing research activities, patents, or grants.
  • Tangible / material asset: all those palpable assets, movable or not, and properties (deemed to be plants, buildings, and machinery).

Thus, a fixed asset helps the company develop its business activity, while a current asset (temporal assets) would have more to do with the activity itself.

When purchasing fixed assets, the transaction must not be considered an expense, but an investment. However, as those assets age, they fall in value. That is known as depreciation and and it normally represents only the passage of time: it is understood that these things undergo some wear after the years in case they are material assets, or they may find technical obsolescence in case they are technological elements.

On the other hand, current assets are those reasonably expected to be converted into cash, particularly within one year. It is logical then that they represent the capacity to pay of the company; that is, its solvency. The capacity of an asset to be converted in cash is what we understand as liquidity.

Depending on the type of business, current assets may be measured by barrels of oil, foreign currency, or any other type of measurable goods. Current assets normally englobe:

  • Cash: liquid money and assets we dispose of in our business, either physically or in a bank account. Everything we understand as cash must be immediately available at all times.
  • Receivables: invoices to be paid, for example.
  • Inventory/Stock: everything we have stored that we need for the execution of our productive activity. This can be raw materials, works in progress, or already finished goods.

These are the main difference between the two types of assets. Being familiar with this type of things will help us a lot carrying our business in the most convenient way.

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