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What is business insurance?

"Risk " is part and parcel of a business and is unavoidable. However certain risks which a business faces can be avoided by insuring your business called business insurance.

You pay a premium and insure your business for a sum of money called sum assured. Business insurance covers fire and allied perils, loss of Company equipment due to theft, third party liability if your business causes damage to public property and a professional indemnity cover.

Why Business Insurance?

You invest a lot of money in a business. You want to concentrate only on making a profit. You have uncertainty in the business environment (inflation and political changes) which can affect your business. There is nothing you can do about these changes in the business environment.

A business also faces risk to its location due to a fire, flood or a natural calamity. This is true mainly for a manufacturing unit (Factory which manufactures products).Your business might face risk from theft of data by your employees. This is true especially in the service industry (Financial services and IT). On the job injuries are common to a business (especially for a manufacturing unit).You would have to pay a lot of money in compensation to your employees injured on duty. The risk due to this uncertainty can be avoided by availing business insurance.

Why buy Business Insurance?

Protection from Fire

Compensation available to the location of the business, furniture and also costly office equipment if destroyed in a fire.

 

Compensation to Workers

Your workers are compensated, if they suffer on the job injuries. Workers compensation is compulsory in India.

 

Protection from Theft

Your business is compensated from any theft, burglary or robbery on the business premises.

 

Professional Indemnity

Compensation to clients and legal fees taken care of, if errors, omissions or negligence by the business, results in a loss to the client.

Eligibility for Business Insurance

Any kind of business willing to insure against possible risks.

Key factors to consider for Business Insurance

Your business must avail worker's compensation

It is compulsory for businesses in India which employ workmen to avail worker's compensation. If your employee is injured, killed during the course of his work (on the job duty) then this is an on the job injury.

The workers compensation policy pays the worker compensation/money for injuries suffered at work.

Protection against fire and allied perils

If your business is a manufacturing unit then protection/cover against fire and allied perils (earthquake, landslides, floods, storms) is a must.

You must insure your entire property against these risks. Insure the boundary walls of your business/manufacturing unit, elevator/lift, office equipment, costly electronic equipment and furniture.
Document (Show proof of ownership) of all this equipment so that the insurer can easily settle your claim.

Take insurance against theft

Your business can suffer a severe loss due to a theft/burglary. You can avail insurance/cover against the loss you suffer in a theft or the damage to your business property in a burglary/attempted burglary. You are not covered for theft of jewelry, property and business documents.

You must avail a sufficient sum assured (Coverage amount) for your business so that the loss of equipment in a theft is not too costly for you.

General third party liability

Your business must avail a general third party liability to protect the business from claims of injury and death of a third party during the course of the business.

This also covers:

  • Damage and destruction to the property of a third party.

  • The advertisements of your business may invade the privacy of a person (this affects his/her personal life), infringement of the copyrights/patents/trademarks of another business or defame a person (libel).

  • Claims of harassment and discrimination.

  • All these claims for damages are settled by a general third party liability.

Professional indemnity insurance:

While running a business if damage/injury is caused to your clients (people you serve) then you are liable to pay for damages.This is mainly availed if you are a highly qualified professional such as a lawyer, doctor, chartered accountant, engineer or a consultant.

The claims settled in professional indemnity insurance are:

Negligence: Your negligence or the negligence of the business causes death or injury to your clients. If you are a doctor then you must have professional indemnity insurance.

Copyrights: If you unintentionally infringe on the copyrights and the patents of another business.

Loss of data: If you lose data or important documents of your clients then you will have to pay huge amounts of money in damages. Injury caused by machines: The machines you use in the business can cause injury to a client (Think machines doctors use). You must avail errors and omissions cover if your business uses information and network technology.

A professional indemnity insurance covers (pays up claims for such damages).

Product liability insurance

This insurance is very necessary if you have a manufacturing unit. The products your business manufactures could be defective and cause injury to a client (customer) who purchases your product.

These products are generally used, touched or consumed. If you have a business which manufactures food products, toys and so on make sure to avail product liability insurance.There are different types of business insurance policies. You need to make sure that your business has all the protection it needs.

Criteria

  • There must be an actual loss of business income.

  • The business must experience a necessary suspension of operations during restoration.

Types

Property Insurance: Protects against damage to business location (can include specific insurance such as fire...)

Causality insurance: Broad category of property insurance, protects against damage and liability, vehicle insurance, elevator insurance.

Public liability insurance: Protects against liability claimed by third party due to business or its employees' negligence.

Worker compensation: Pay workers in case of injury or illness.
Health insurance for its employees.

Scripted Insurance: If your business is unique and needs a specific kind of insurance.

Business interruption insurance: Protect against loss or damage to cash flow or profit caused by business not able to operate due to some reasons.

 

Concepts & FAQ's Business Insurance

What is Business Insurance?

Business insurance is a broad description that can be broken down into a list of Nine Types of insurance policies. Insurance companies selling business insurance offer policies that combine protection from all major property and liability risks in one package.

1. Property Insurance : Property insurance insures against loss or damage to the location of the business. It can also insure the property of others in your control when the loss occurs.

Property insurance can be for a specific risk. For example, a fire insurance policy insures only against a fire loss to the location. A cyclone is not a fire and, therefore, that loss would not be covered. The insured location may be owned, leased or rented.

2. Casualty Insurance : It is a broad category of coverage against loss of property, damage or other liabilities.Casualty insurance includes vehicle insurance, liability insurance, theft insurance and elevator insurance. It is mainly used to describe the liability coverage of an individual or organization's for negligent acts or omissions.

3. Liability Insurance : Liability insurance insures against liability legally imposed upon your business because of the negligence of the business or its employees. Put in another way, it protects your business when the business is sued for negligence.

4. Commercial Vehicle Insurance : Your personal automobile policy does not cover vehicles used by your business. If your business uses vehicles or anything that is required to be titled by your state, then you need a commercial auto policy. Commercial auto coverage insures against property damage to vehicles and damage caused to others by those vehicles.

5. Workers Compensation : You will need to insure your employees against on-the-job injuries. Most states in India have put into place some form of workers' compensation system. Workers' compensation is a system where the employee is not allowed, by statute, to sue their employer for on-the-job injuries; but, in return, the employer must participate in a system that provides nearly automatic payment to the employee in case of injury for medical bills and damages.

There are many options for workers' compensation coverage. Some states allow an employer to opt-out of the system if the employer is self insured, some run the system through private insurers while others use state agencies.

6. Business Interruption Insurance : Business interruption insurance insures against loss or damage to the cash flow and profit of a business caused by the business being unable to operate because of interruption.

The easiest example is to think about a critical piece of machinery being struck by lightning. The repairs to the machine may be covered by other coverage such as property or casualty insurance.

7. Health Insurance To be competitive, most businesses need to offer their workers health insurance. This insurance offers a health coverage benefit to your employees (and you).

8. Life and Disability Insurance Life and disability insurance protects the business against the death or disability of key employees.

For example, one partner carries a life insurance policy naming the partnership as a beneficiary. If that partner dies, and the business has planned properly, the proceeds of the policy can be used by the business to buy out the share of the decedent's partnership interest from the estate.

9. Other Insurance or Scripted Policies It could very well be that your business is so unique to have need for coverage that is a mixture of some of the coverage listed above or something written specifically for your particular risk.

Examples of such scripted insurance are that of some actresses, actors, or sports stars that have had legs insured at some point in their careers.

Thinking of buying a Business Insurance ?

To be absolutely sure of WHAT TO LOOK OUT, talk to IndianMoney.com on the phone for FREE financial consultation.

Expert Financial Advisors from IndianMoney.com would provide you unbiased, correct and up to date information so that you can make an informed financial decision.

Frequently Asked Questions

What do I need to know about Business Insurance?

Commercial insurance is designed to help protect many of the risks your business can face, including: damage or destruction to your business vehicles, office equipment, and inventory. Loss of income in case you have to close-up shop temporarily because of a covered loss and crime coverage including robbery, burglary, even employee dishonesty

How premium is calculated in business insurance policy?

There are lots of different factors which may affect your premium. These include the size of your business, the type of work you do, how much cover you need, how long you've been in business and whether you have had any claims. To choose a suitable business insurance, call us on 080 67974000

Do I need to tell insurers everything about my business?

Your Insurers need to be aware of all the facets of your business in order to assess the risk and meet the needs and demands of your insurance requirements to ensure you are fully protected. Failure to advise your insurers of a material fact could invalidate your cover.

Can we cover exported and imported goods?

Marine & Aviation Insurance is available to cover goods which your business intends to export and/or import, as well as other marine and aviation risks.

What can I insure my business premises against?

Your buildings and/or contents can be insured against:
Fire , Special Perils of explosion , Earthquake , Aircraft , Riot & malicious damage , Storm , Flood , Escape of water , Impact , Subsidence , Theft involving forcible & violent entry or exit , Other damage of an accidental nature

What triggers a Business Interruption Insurance policy?

Business interruption insurance requires three elements to trigger coverage: There must be an actual loss of business income. Business income is defined as net income and continuing operating expenses. To determine if there has been a loss of business income, net profit or loss is added to necessary continuing operating expenses and then compared to what would have been earned but for the loss. The business must experience a necessary suspension of operations during restoration. Some older forms do not define suspension, but more recent Insurance Services Office policies have defined the term to mean both a complete cessation of operations as well as a slowdown. The period of restoration usually begins some specified amount of time following the loss-72 hours for the ISO form-and ends when the property should be repaired or replaced with reasonable speed or when the business resumes at a new location, whichever comes first. The loss must result from direct physical loss or damage at the premises described in the declarations that is caused by a covered cause of loss. To know more on business insurance, call us on 080 67974000

 

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