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By the time Puneet Agarwal got the news that his shop was on fire, it was already too late. An electrical short-circuit had almost entirely gutted the building where the 28-year old cloth merchant ran his shop from Kalakar Street at Kolkata’s Burrabazar, the largest wholesale market in that part of the country. Puneet couldn’t recover anything from his shop, including the cash he had kept overnight for depositing in the bank next morning. With no shop insurance policy, Puneet now stares at an uncertain future.
The above case study if just one example out of many such incidents that keep on happening almost on a daily basis. While people are largely aware of health, term, and motor insurance, at least in the big cities and town, shop and business insurance is mostly ignored. It seems to be the prerogative of only big companies and factories. The average small trader often gives business insurance a miss.
If Puneet’s condition hasn’t convinced you, and you are wondering whether to invest in a business insurance policy, consider the following circumstances.
- The automobile industry may suffer a loss because of a rise in raw material prices and labour costs. Worst still could be a closure of the unit, courtesy lockouts and strikes.
- The chocolate industry may suffer from a cocoa shortage that’s mostly grown in the African countries like Ivory Coast and Ghana where civil wars are commonplace.
- Political unrest in some of your major export destinations may hamper you revenues.
Risk is an inherent part of all business activities. But certain risks that a business faces can be reduced or entirely avoided if you insure your business.
Sample this. When you ride a motorbike, why do you wear a helmet? You may be the best rider in town and know the city streets thoroughly. But you may meet with an accident, even if it’s not your fault. The helmet you wear will protect you from head injuries that could be fatal.
In an almost similar way, your business requires protection against the risks that it may face, and a business insurance policy would protect you against some of the most common risks.
Business insurance package
Almost all major insurance companies offer business package policies that provide comprehensive protection against exigencies like fire, personal accident, burglary, third-party liability and others. These plans are convenient for business as you can cover all your assets under a single plan.
Insurance companies also sell individual policies where you can choose a customised portfolio. For business units at multiple locations, some fire and burglary covers offer a floater option. This means just a single policy will cover all the locations. These are annual plans and should be renewed every year.
Types of business insurance
Fortunately, as a business owner, you have access to several types of insurances that can reasonably cover you from the risks. Here are the most common ones in India.
Property insurance: Whether your business runs on an owned or leased space, property insurance is extremely important. It covers losses to inventory, equipment, signage, and furniture in case of a storm, theft or fire. However, natural calamities that cause mass destruction like earthquakes and floods are usually not covered under property insurance.
Workers’ compensation: Such a policy is usually added to a standard business insurance plan. It covers medical treatment, death and disability benefits if an employee of your business gets injured or dies while on duty. Even if your workers perform seemingly low-risk duties, a major slip-and-fall injury may lead to a pricey claim. To prevent employers from evading claims, the government has made workers’ compensation mandatory in some sectors of the economy, particularly the ones that are risk-prone.
Product liability insurance: It’s a must if you manufacture goods for sale in the general market. Even if you adopt all necessary measures to ensure your goods meet the relevant standards, you are not safe from lawsuits and damages filed by your consumers. A product liability insurance protects your business in such cases. The coverage available depends on your type and volume of business.
Business interruption insurance: The operations of a business could be interrupted because of a catastrophic event or disaster. During such a time, the business will see a drop in income because your staff will be absent from office. Leads won’t materialise into sales. This type of insurance is imperative for companies that need a physical location for conducting their business; and that includes your neighbourhood grocery store as well.
Vehicle insurance: When company vehicles are used, those should be fully insured in the name of your business to get cover when an accident occurs. While you may just get insured against third-party injuries, a comprehensive insurance will cover the vehicle involved in the accident as well. If you use your personal car in the business, then the motor insurance of the vehicle will cover it in case of losses.
Group accident and medical insurance: It’s your responsibility to ensure the well-being of your workers as an employer. It’s an important factor for the success of your business. group medical and personal accident cover will provide monetary support to your employees if there’s a crisis, sans putting any financial burden on the business.
Data protection: While a burglary or fire protection policy covers the physical damage to your computers and servers, what about the cost of retrieving the information stored in these machines? In most cases it’s just as much as replacing the computers and storage devices. It’s almost like misplacing your wallet, where the important papers and credit cards are a greater loss than losing cash. A separate electronic equipment policy for your business can cover the loss of information and pay for the reinstatement costs.
Remember, a good business thrives on taking risks. It’s often the foundation to reap profits. But at the same time, it will be foolhardy to ignore timely precautions. Buying sufficient business insurance is wise, especially for small investors who don’t have enough buffer money to bail them out in case of losses. The amount of insurance will obviously depend on the volume of your business.