Only a few types of business insurance are compulsory for a Singapore SME. If you employ staff, you must insure all manual workers and non-manual employees earning S$2,600 or less a month under the Work Injury Compensation Act 2019. Vehicles used on the road need third-party cover for death and bodily injury. Employers of Work Permit and S Pass holders must buy medical insurance, and a S$5,000 security bond is needed for each non-Malaysian Work Permit holder. Some licences also require professional indemnity cover. Everything else, from cyber and public liability to directors’ cover, is optional but often decides whether one claim can sink the company.
Which business insurance is compulsory for a Singapore SME?
| Requirement | Who it applies to | Key points |
|---|---|---|
| Work injury compensation insurance (Work Injury Compensation Act 2019) | All employees doing manual work, whatever their salary; non-manual employees earning S$2,600 or less a month (excluding overtime, bonuses and allowances); local and foreign staff | Since 1 January 2021 policies must be issued by a designated insurer. Failing to insure is an offence with a fine of up to S$10,000, jail of up to 12 months, or both |
| Motor third-party insurance (Motor Vehicles (Third-Party Risks and Compensation) Act 1960) | Any company that uses, or lets others use, a motor vehicle on the road | Covers liability for death or bodily injury to third parties; damage to other people’s property is not part of the compulsory requirement |
| Medical insurance for foreign employees | Employers of Work Permit and S Pass holders | At least S$60,000 a year for inpatient care and day surgery. From 1 July 2023, for claims above S$15,000 the insurer pays 75% and the employer 25%. The premium cannot be passed on to the worker |
| Security bond | Employers of each non-Malaysian Work Permit holder | S$5,000 per worker, as a banker’s or insurer’s guarantee, in effect before the worker arrives |
| Professional indemnity insurance under licensing rules | Certain regulated professions and licensees | Depends on the licence; see our sibling guide to compulsory professional indemnity insurance |
Two points are often missed. First, work injury compensation insurance for non-manual staff above the S$2,600 threshold is optional, but the employer must still pay compensation for a valid claim whether or not it is insured. Our WICA employer guide explains the claims process. Second, the security bond is a guarantee to the government, not insurance for the employer. If MOM forfeits it, for example because salary was not paid on time or the worker was not repatriated, the insurer pays MOM and will usually seek full reimbursement from the employer. Our guide to work permit security bond and insurance requirements sets out the conditions.
Which optional covers should an SME consider?
Optional does not mean unimportant. The right mix depends on what your company does, who it deals with and what your contracts require. The table maps common exposures to the cover that typically responds.
| Exposure | Cover that typically responds | Who most needs it |
|---|---|---|
| A client says your advice, design or service caused it a loss | Professional indemnity (PI) | Consultants, IT firms, agencies, designers, engineers, accountants |
| Hacking, ransomware or a data breach | Cyber insurance | Any business holding customer data or relying on IT systems |
| A visitor is injured or property is damaged at your premises or work site | Public liability | Shops, restaurants, offices receiving visitors, contractors |
| A product you make or sell causes injury or damage | Product liability | Manufacturers, importers, distributors, online sellers |
| Directors are sued for decisions made in running the company | Directors’ and officers’ (D&O) liability | Companies with investors, non-executive directors or regulated activities |
| Staff theft, or staff tricked into paying a fraudster | Fidelity or crime cover, sometimes with a social engineering extension | Businesses making frequent payments or holding cash or stock |
| Fire, flood or break-in damages stock or equipment and stops trading | Property (fire, contents) and business interruption | Businesses with premises, stock or equipment |
| A founder or key salesperson dies or becomes seriously ill | Key person insurance | Companies relying on one or two individuals |
Each cover has its own guide in this series. Start with our overview of professional indemnity insurance in Singapore and our guide to cyber insurance for SMEs. For premises accidents, see what happens when a customer is injured on business premises, and for goods, our guide to product liability claims. Board-level exposure is covered in directors’ cyber risk liability, and payment fraud in whether insurance pays when staff are scammed. If you are considering key person cover, the tax treatment of keyman insurance premiums is worth checking first.
How do you work out what your company needs?
- List your legal must-haves. Count employees by manual and non-manual work and salary, list work pass holders and nationalities, and list company vehicles. Confirm any insurance your licence requires.
- Read your contracts. Leases, client contracts, tender documents and financing agreements often require specific cover and limits. Our sibling guide on what to do when a client contract requires PI insurance explains how to match the contract to the policy.
- Identify the worst realistic loss. For each exposure in the table, ask what one serious event could cost in claims, defence costs, lost income and recovery.
- Compare with what the company can absorb. If one event would exceed your cash reserves or put the company at risk of insolvency, that risk is a priority for cover.
- Get advice from a licensed broker or insurer. Give accurate information on the proposal form. Non-disclosure can give an insurer grounds to refuse a claim.
- Diarise renewals and conditions. Record renewal dates, notification obligations and conditions such as security controls that must be maintained.
- Review every year, and whenever the business changes: new services, new markets, more staff or new premises.
What is left uninsured even with good cover?
- Deductibles and excesses, which the company pays first on each claim.
- Losses above the limit, or above a lower sub-limit for a specific type of loss.
- Promises you made in contracts that go beyond your ordinary legal liability.
- Deliberate, dishonest or criminal acts by the company or its directors.
- Known problems that existed before the policy started and were not disclosed.
- Fines and penalties, unless the law allows them to be insured and the policy covers them.
- Under-insurance: if property is insured for less than its value, many policies reduce the claim proportionally.
- Breached conditions, such as late notification of a claim or failing to keep required security controls.
Example: A Singapore renovation company with eight employees, six of them Work Permit holders, owns two vans. Its compulsory list is work injury compensation insurance for all eight staff (six do manual work and two office staff earn under S$2,600), motor third-party cover for both vans, medical insurance and security bonds for the Work Permit holders. Its contracts with property managers require public liability cover. After reviewing its risks with a broker, it also considers contractors’ all risks cover for projects and fidelity cover because two supervisors handle cash payments to suppliers. It decides that PI cover is not needed for its building work, but its broker points out that any design advice it gives clients could create that exposure.
What happened when businesses were not covered?
Employers prosecuted for not insuring workers (Singapore, 2017)
MOM announced in December 2017 that two employers had been fined for failing to maintain work injury compensation insurance and failing to pay compensation, as reported by Human Resources Director Asia in January 2018. A renovation firm, Valiancy Enterprise, had not insured five employees and failed to pay a carpenter S$25,000 in compensation after a 2015 accident; it was fined S$20,000 and barred from work permit applications for six months, and later paid the worker. A marine and construction sole proprietor, who had not insured 11 employees, was fined S$21,000, faced a 120-day jail term in default of paying the fine and compensation, and was also barred from work permit applications for six months. Without insurance, the compensation itself fell on the employer, on top of the fines.
Arup’s deepfake payment loss (Hong Kong, 2024)
As reported by CNN in 2024, an employee in the Hong Kong office of the engineering firm Arup was deceived by a video call in which the company’s chief financial officer and other colleagues were deepfakes, and transferred about HK$200 million (around US$25 million) in 15 transactions to fraudsters. Arup said its financial stability and internal systems were not affected. The case shows that losses from deception are a distinct risk: standard property, liability and PI policies are not designed for them, and cover depends on crime or cyber policies, often with specific sub-limits and verification conditions.
Frequently asked questions
Do I need work injury insurance if I am the only director and have no employees?
The Act’s compulsory insurance applies to employees. A sole director who is not employed under a contract of service is generally outside it, but anyone employed by the company must be considered. Check each person’s status.
Is public liability insurance compulsory?
Not under a general law, but landlords, shopping centres, event venues and clients frequently require it by contract, and a business that cannot show cover may lose the lease or the job.
Does medical insurance for foreign workers replace work injury insurance?
No. They are separate requirements. Work injury compensation deals with work-related injury and illness, while the medical insurance requirement covers inpatient and day surgery costs, including conditions that may not be work-related.
Can my company deduct insurance premiums for tax?
Premiums for business insurance are generally deductible when incurred to earn the company’s income, but the rules for some covers, such as key person insurance, have specific conditions. Check with your tax adviser.
Will insurance protect me as a director personally?
Only some policies, such as D&O, cover directors personally. Company policies generally protect the company, and no policy covers deliberate wrongdoing.
Official sources: MOM: work injury compensation insurance; Work Injury Compensation Act 2019; MOM: medical insurance for Work Permit holders; MOM: security bond; Motor Vehicles (Third-Party Risks and Compensation) Act 1960; Monetary Authority of Singapore.
Insurance cover itself should be arranged through a licensed insurer or insurance broker.
Need help with business insurance obligations and liability claims?
If your company, or you as a director or shareholder, is dealing with compulsory insurance obligations, an uninsured loss or a liability claim, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, for example if a claim is made against your company or you are sued, we will refer you to a firm on our panel of Singapore law firms that regularly handles commercial liability and insurance disputes. Raffles Corporate Services is a corporate services provider, not a law firm or insurer, and this article is general information, not legal or insurance advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services