September 1, 2022

Bharat Sookshma Udyam Suraksha (BSUS) Policy Coverage – Explained

Bharat Sookshma Udyam Suraksha (BSUS) Policy Coverage – Explained

Bharat Sookshma Udyam Suraksha (BSUS) is a Fire Insurance policy designed to cover small and mid-sized businesses with insurable assets below ₹5 Crore. BSUS is one of the three insurance products widely sold in India that provide coverage to commercial assets against Fire and Allied Perils.

Assets like buildings, furniture, structures, stocks of goods, plant and machinery are all protected from loss or damage when caused by risks mentioned in the policy. In the event of a loss, the insurance company reimburses or indemnifies the insured business for the cost of repairs, replacement, or reinstatement incurred.

Let’s take a deeper look at what risks and events are covered by a BSUS policy-

  1. Fire - This includes fire caused by short circuits, ignition of combustible material, natural heating, spontaneous combustion, or the item’s own fermentation. Damage due to bushfires, forest/jungle fires is also covered.
  2. Lightning - Any damage to property or machinery caused by the direct impact of a lightning strike, or the fire caused by a lightning strike can both be covered.
  3. Explosion/Implosion - This includes an explosion following an unexpected fire around some combustible material. Implosion of certain devices can also be covered under this policy.
  4. Impact Damage - This includes any loss or damage caused by a collision with any external physical object (e.g. vehicle, falling trees, aircraft, wall, or animal). Under this cover, damage due to falling objects, such as parts of an aircraft, or even items thrown off the aircraft, can also be covered.
  5. STFI - This stands for Storm, Typhoon, Flood, Tsunami, Hurricane, and Inundation. Under this cover, damage to business property due to a storm, cyclone, flood, tornado, or any other natural disaster can all be completely covered. Additional covers in this category include coverage for earthquakes and volcanic eruptions.
  6. Land Subsidence - Here, damage due to the subsidence or collapse of land on which the business property is located can be covered. Examples of this include rockslides, landslides, mudslides, etc.
  7. Missile Testing Operations - If your business is located in a location where the military often conducts test operations for its missiles, any damage or loss caused to your business because of such tests can be covered under a BSUS policy.
  8. RSMD - Here, property loss due to Riots, Strikes, and Malicious Damage can be covered. This includes financial losses to your business caused by malicious or criminal acts committed by a third party (persons not associated with your business or its employees).
  9. Terrorism - Under the Terrorism Cover, damage to business assets due to acts of terrorism or violence caused by a group of persons can be covered. This also includes damage caused by any suppression acts taken by the military or the government against terrorist attacks.
  10. Water damage - Apart from flood and inundation coverage, a BSUS policy also covers water damage caused to property due to bursting or overflowing of water tanks, apparatus and pipes, and any leakage from automatic sprinkler installations.
  11. Theft - A BSUS policy will cover theft of insured commercial property within 7 days of the occurrence of any of the above mentioned perils, provided the theft is a direct result of such perils.

The covered perils and events listed above collectively form the Standard Cover of a BSUS Fire Insurance policy. In addition to this, there also exist certain in-built covers that are worth mentioning. These covers provide reimbursement for expenses that may arise after damage to the insured property has occurred and during the recovery phase. They are described below-

  1. Additions, alterations or extensions - If you end up erecting, acquiring, or adding any new property to your insured business (such as building, plant, machinery, or furniture and fittings) during your BSUS policy period, such additional property is automatically covered against damage caused by the above mentioned perils. However, in order to avail this coverage, you must inform the insurance company of such alteration within 7 days. The maximum coverage limit here is 15% of the Sum Insured (excluding stocks).
  2. Temporary Removal of Stocks - Stocks of goods that have been temporarily removed from the insured business premises for the purpose of fabrication, processing, finishing, or a similar activity can be completely covered against damage or loss. The maximum cover provided here is up to 10% of the Sum Insured of Stock. Stocks that are located at more than one location are also covered under the floater coverage offered under this policy.
  3. Cover for Specific Contents - Here, certain assets, other than building, machinery, or stock, that may also be destroyed during a fire, flood, riot, or a similar event can be covered to a certain extent. These can be summarised as follows-
    • Money - up to ₹50,000 during the policy period
    • Important documents such as deeds, business books, plans, drawings, securities, and manuscripts, can also be covered but only for the cost of the materials and clerical labour expended in reproducing such records. This cover is limited to ₹50,000 during the policy period
    • Computer programmes, information and data can also be covered for up to ₹ 5 Lakh during the policy period
    • Employees’, Directors’, visitors’ personal effects of every description (other than motor vehicles) can be covered up to ₹15,000 per person for a maximum of 20 persons in a policy period
  4. Start-up expenses - Any startup costs incurred by you subsequent to a loss or damage caused by an insured event will be covered up to ₹5 Lakh during the policy period. Startup costs here imply any reasonable expenses which are incurred in order to restart the business to its normal functioning after the occurrence of a damaging event. Costs for planning, organising, opening up, and others are included here.
  5. Costs for removal of Debris - This includes any costs incurred by your business in dismantling, demolishing, shoring up or propping up of damaged building, structures, equipment, etc. after a disastrous event has occurred. The maximum coverage for costs incurred during debris removal is 2% of the claim amount.
  6. Professional fees - If your business ends up hiring professionals like architects, surveyors, and consulting engineers for the purpose of preparing plans, and other services in connection with the reinstatement of the insured building, machinery, or equipment after damage, then any reasonable fees thus incurred can be covered. The coverage limit under this section is limited to 5% of the claim amount. However, it must be noted that any fees incurred for the purpose of preparing a claim or estimating the degree of loss will not be covered.
  7. Costs compelled by Municipal Regulations - This provides coverage for costs incurred solely due to legal requirements. If your business has to incur additional costs of reconstruction or reinstatement because of mandatory compliance with regulations or bye-laws laid down by the municipal or state authorities, then such costs can be be covered under a BSUS policy. However, you must commence and finish said reconstruction within a reasonable amount of time from the date of property damage.

Since BSUS is a standard Fire and Allied Perils Insurance policy, the coverage offered under this policy is consistent across all insurance companies. So, regardless of which insurer you choose to insure your business with, the coverage will virtually remain the same. However, the admissibility and extent of claims will vary from insurer to insurer. Generally, payout under Fire Insurance policies is made on the following bases:

Nature of loss

Payout Made

Partial loss of Insured Property (Building, Plant, Machinery, Furniture,Fixtures, etc.)

As long as repairs are carried out by the owner within 12 months of the date of damage, the cost of repairs will be reimbursed

Total loss of Insured Property

when the reinstatement, or rebuilding of such property has taken place

The payout will be on the basis of the reinstatement / replacement value without deducting depreciation 

Total loss of Insured Property

when NO reinstatement or rebuilding of such property has taken place

The payout will depend on the market value of the property, i.e., the reinstatement value after deducting depreciation.

Partial loss of Insured Stock

The extent of such loss will be paid

Total loss of Insured Stock

Loss of Raw material - Landed cost at premises

Loss of Stock in progress - Input cost at the time of damage

Loss of Finished stock - Manufacturing cost of the finished goods, or Contract price of goods sold but not delivered

Bharat Sooksham Udyam Suraksha is a highly standardized and affordable property insurance policy available for small businesses in India. Its extensive coverage make it the perfect protection for all kinds of establishments, including shops, restaurants, hotels, warehouses, and factories.

Further Reading

What does a BSUS policy not cover?
Why does your small business need Fire Insurance?

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.