China has been a country of near constant change during these past two decades. For the most part, this change has been for the better, and it has vaulted the country of over 1.35 billion from near total poverty into one with the single largest middle class on earth.
Primarily because of this change, many people consider the country a goldmine of profitable business opportunities.
The number of small to medium business launches in the country has been rapidly increasing, subsequently resulting in a sharp increase in Gross Domestic Product (GDP) as China’s economic indicators suggest a 5.5% year-on-year increase in GDP during the first half of 2023.
This increase in investment, along with the improvement in general operating environments, attracts both entrepreneurs and established businesses to China. If you’re also one of the people planning to embark on a business venture here, it’s crucial to safeguard your business against unforeseen risks.
While there are many things you can do to ensure you remain operational, the chances that something out of control will occur isn’t zero. One way to mitigate these risks is to secure the right types of insurance. And what are those? Let’s take a look.
Compulsory Insurance
For businesses operating in China, there are a number of compulsory insurance policies you may be required to secure. Before we look into them, there’s one type of insurance all businesses in China are legally required to attain: Social Insurance.
Social Insurance
Officially called the Social Security Scheme, China’s version of social insurance was officially implemented across the country in 2011 to ensure that employees have at least some sort of a safety net.
This scheme is similar to many social insurance schemes in other countries where both the employers and employees are required to make contributions to a fund that will be used to secure cover for five major elements:
- Pension
- Medical
- Work-related injury
- Unemployment
- Maternity
Such contributions are mandatory for all Chinese citizens. When it comes to expats, however, the rules regarding the requirements to join the scheme are a little fuzzy. While the government has stated that foreigners are required to join the scheme, it appears this is not being enforced in some cases.
Industry/Business Specific Compulsory Insurance
For some types of industries and businesses, there may be compulsory insurance you need to consider. Here are some of the most commonly secured compulsory insurance plans:
- Green Insurance
For businesses the government deems to be a high environmental risk, you’re required to acquire green insurance, a type of insurance that covers your business from liability arising from environmental damage or third-party medical treatment after an environmental disaster, etc.
- Third-party Motor Insurance
If your company provides vehicles to employees, you are legally required to secure at least third-party motor coverage for every vehicle that will be on the road.
- Construction Worker Insurance
According to Chinese law, companies that hire construction workers for “dangerous” jobs are required to secure liability coverage that covers job-related injuries or illness. Most companies will secure either company-wide liability insurance or personal accident liability coverage for individuals.
Non-compulsory Insurance
The acquisition of non-compulsory insurance plans is recommended, but as of 2023, there’s no set law stating that businesses must secure them. Regardless, there are five types of insurance that could prove to be beneficial for your business:
- General Liability Insurance
General liability insurance covers your company from any damages or charges arising from damages caused by an employee to a third party such as a person or property. This type of insurance also usually covers your business should the damage be done because of negligence.
- Employer’s Liability Insurance
Employer’s liability insurance covers you or your employees in case of an accident, injury, dismemberment, or death while they are working. Most businesses securing this type of insurance look for a policy that extends coverage beyond the coverage that’s legally required.
- Property Insurance
It would be beneficial for any business purchasing a building to secure property insurance, which is designed to protect the building and its contents from damage, theft, and loss.
- Errors and Omissions Insurance
Also referred to as “professional liability insurance,” errors and omissions insurance is designed to protect businesses from damages from the failure of your service or products.
For example, if you are a law firm, this type of insurance will protect you from any lawsuits that arise after you fail to offer what the other party deems satisfactory.
It’s important to note that some general liability insurance plans don’t cover this, so it’s best to determine whether you need to secure it or not.
- Personnel Insurance
It’s often said that a business is as good as its employees. In other words, taking care of your employees is a win-win situation.
Regarding the insurance policies in China, you can offer your employees life or home insurance, and most importantly, health insurance plans that are better than those required by law and don’t provide adequate coverage.
At Pacific Prime, our team of sales executives can offer you a variety of business insurance solutions to all manners of business in China. If you’d like to learn more about the policies we offer, visit our website today.
Disclaimer: Pacific Prime solely represents, operates, and manages locally regulated insurance products and services in the territory of PR China. Any references to Pacific Prime Global Company or Group, the international services, insurance products, or otherwise stated written or verbally, is for introduction purposes about our overseas network only as each entity is fully independent.