October 26, 2021

Bharat Sookshma Udyam Suraksha (BSUS) Insurance Policy

Bharat Sookshma Udyam Suraksha (BSUS) Insurance Policy

A Bharat Soookshma Udyam Suraksha (BSUS) insurance policy gives protection to commercial properties like offices, hotels, shops, storage units, manufacturing/industrial units, tank farms, gas holders, etc. from fire and allied perils.

The owner, tenant, or anyone else with an insurable interest in the property can purchase this policy IF the value of all insurable assets (regardless of whether they are actually insured or not) at one location is not more than  ₹5 Crore at the time of policy commencement.

Anyone who owns or occupies an insured property under a lease, as a legal purchaser, or as a tenant, licensee or employee, can purchase a Bharat Sookshma Udyam Suraksha Policy. Furthermore, anyone who holds insured assets like stocks, plant and machinery in trust or on commission, or accepted for job work, can insure them under this policy. In other words, if you have an insurable interest in the property and are legally responsible for it, you can insure it under a BSUS policy.

However, you must also comply with the eligibility criteria for this policy in addition to the conditions listed above. You will only be eligible to purchase a BSUS policy if you meet the following conditions:

  • If you’re engaged in the business of manufacturing or producing goods, or of providing or rendering services, and if you own or are legally responsible for your business
  • If the value of all the insurable assets at any one location is NOT more than ₹5 Crore at the policy Commencement Date. These include buildings, plant and machinery, stock, and all other assets.

‌‌There are typically three types of covers offered under this policy :

1. Standard Cover : A BSUS Policy entails the insurer to compensate for physical loss, damage or destruction of building and structures, plant and machinery, and stock and other assets relating to the insured’s business. The insured properties are covered against the following insured events :

A BSUS policy covers destruction or damage due to:

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In addition to the above, the policy will also cover theft if an insured event is its cause. Any theft within 7 days from the occurrence of said event will be covered.
However, if the stolen article is located outside of the insured premises or attached to the outer walls / roof of the insured premises, the theft will not be covered.

2. In-built covers : These covers go alongside the standard cover. Generally speaking, if your insurer has agreed to pay claims arising out of loss or damage to your insured property due to events included in the standard cover, they will also compensate you for the following in-built covers :

  • Additions, alterations or extensions : Any additional property (such as building, plant, machinery, furniture, etc.) that you erect, acquire or add to the insured premises during the policy period will be covered, provided it is not already insured by another policy. The coverage will be upto 15 % of the sum insured (excluding stocks). The details of such addition or extension need to be conveyed to your insurer within 7 days of possession, or as otherwise stated in the policy

  • Stocks located at more than one location (on floater basis) : Here, physical loss or damage to movable property is covered. Principles of stock declaration should be followed as per the floater basis.
    All stock locations, address changes occurring after the commencement date of the policy and aggregate value of sum insured should all be declared according to the policy schedule. Additionally, the insurer should have a good internal audit system in order to accurately ascertain the total amount of risk at each location at any given point of time

  • Temporary removal of stocks : Loss to movable property (stock) that has been temporarily removed to another location for the purpose of fabrication, processing or finishing is covered up to 10 % of the value

  • Cover for Specific Contents : Here, loss or damage to the following assets during the policy period is covered -

    • Money amounting up to ₹50,000
    • Documents such as deeds, manuscripts, business books, plans, drawings, securities, etc., to the extent of materials and labour required in reproducing them up to ₹50,000
    • Computer programmes, information and data to the extent of materials and labour required to reproduce them up to an amount of ₹ 5 Lakh
    • Employees’, Directors’, visitors’ personal property of every description (other than motor vehicles) for an amount not exceeding ₹15,000 per person for a maximum of 20 persons
    • Start-up Expenses : Any costs incurred while starting up your business (i.e. continuing operations) after a loss or damage due to insured events during the policy period shall be covered up to ₹ 1 lakh
  • Professional fees : Reasonable fees of Architects, Surveyors and Consulting Engineers is covered up to 5 % of the claim amount. However, fees or costs incurred for preparing a claim or estimate of loss/damage caused by any insured peril will not be compensated for

  • Costs for removal of debris : Reasonable expenses incurred towards removal of debris from insured premises, such as dismantling, demolishing or propping up of insured buildings, machinery or any other insured item, shall be covered up to 2% of the claim amount

  • Costs compelled by Municipal Regulations : Additional costs of reconstruction or reinstatement of insured property done solely for the purpose of compliance with the rules and regulations of a Municipal Authority will be covered. This is also known as the Local Authority Clause.
    However, certain conditions like time of commencement of such reconstruction or repair after the date of damage, time of completion of such reconstruction or repair not exceeding 12 months from the date of damage, total amount recoverable not exceeding the sum insured, etc. shall be applicable as per the details mentioned in the policy

3. Standard add-on covers : Certain add-on covers can be provided for on payment of additional premium, such as the Declaration Policy for Stocks, wherein a standard cover for frequent fluctuations in stock values on a declaration basis is offered. This is applicable when the insurer is not sure about the exact value of stocks at one or more locations.

A one time declaration of a provisional sum insured is required along with details of each location and the type of stock present at each location. On a specific date every month, the insurer declares the actual value of stock for that month, according to which the actual sum insured is adjusted and the excess refunded. Coverage under add-ons can differ from insurer to insurer.

‌The BSUS policy comes with certain exclusions. These refer to events and losses that will not be covered by the insurer.

A BSUS policy will NOT cover loss, destruction or damage due to:

A BSUS policy will NOT cover loss, damage or destruction caused to the following assets under the following conditions :

  • Any electrical / electronic machine, apparatus, fixture, or fitting by over-running,  excessive pressure, short circuiting, arcing, self-heating or leakage of electricity from whatever cause, including lightning
  • Stocks in cold storage, where such damage is caused by a change of temperature
  • Bullion, unset precious stones, curios, works of art, etc. unless specified in the policy schedule
  • Any missing or mislaid insured property where the cause can not be linked to an insured event
  • An insured property that has been removed from the premises, unless this insured property is machinery or equipment that is removed for repairs, cleaning and the like. Additionally, stocks that have been removed will be covered as per the in-built cover mentioned above, called ‘temporary removal of stocks’
  • Any insured property which is covered by an active marine policy at the time of loss or damage will fall outside the purview of BSUS. However, loss beyond the limits of  a marine policy will be covered
  • Any reduction in the market value of an insured asset after its repair
  • Any consequential financial losses caused by an insured event. For example, loss  by delay, loss of income or wages or earnings, etc. We recommend considering a consequential loss policy to cover such risks

In addition to the above exclusions, :

  • The insurer will deduct an amount of ₹ 5,000 for each and every loss suffered under the terms of a BSUS policy. This excess amount will be different for terrorism risk depending on the specifics of the attached clause
  • Any costs, fees or expenses associated with preparing a claim shall not be covered by the insurer‌

‌Here are the types of assets and properties that a Bharat Sookshma Udyam Suraksha Policy covers:

1. Building or structure : This refers to any building or structure, such as a shed, flat, house or unit of a building in the business’s premises. Additionally, a BSUS policy also covers the basement (if there is one) and all fixtures and fittings (like electrical wiring, antennas, etc.) that are permanently attached to the floor, walls, or roof.

The following ‘additional structures’ are also covered as long as they are located inside the premises and used for business :

  • Garage, outhouses, security sheds, towers, porch, fences and gates, compound walls, internal roads, etc.
  • Lifts and hoists
  • Solar panels, wind turbines, air conditioning and central heating systems, security systems, electrical installations, fire alarm and sprinkler systems, power lines and installations, etc.
  • Pipelines located inside the business premises that are used for water, gas and sewage

2. Plant and Machinery : Here, all equipment, machinery, pipes and cables, spares, computers, servers and preloaded licensed system software, located within any structure or in the open area of the premises are covered against all insured events. These can include the following :

  • Machines that are under repair, or have been taken on hire or lease
  • Foundation, bedding and accessories of the machines

3. Stocks of goods or merchandise : ‘Stocks’ here can include any of the below:

  • Finished goods, semi-finished goods, stock in process, stock invoiced and ready for dispatch
  • Raw materials and packing materials
  • Stock accepted for processing or held in trust
  • Stock stored in open in the insured premises

4. All other assets :  Any other tangible property not listed above is also covered, as long as it is located inside the business premises. For example, :

  • Furniture and fixtures, office, telephone and electronic equipment, etc.
  • Canteen and kitchen equipment, gym and permanent sports equipment, etc.

For businesses with assets valuing more than ₹5 Crore but less than ₹50 Crore, a Bharat Laghu Udyam Suraksha (BLUS) policy is applicable

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.