November 22, 2021

Types of Insurance for Small Businesses

Types of Insurance for Small Businesses

In order to run a small business smoothly and effectively, you need to ensure it’s adequately protected even when you’re busy taking care of clients or holding meetings with your investors. The unfortunate truth is, countless businesses collapse every year due to unforeseen events such as fire, workers’ strikes, loss of valuable stock in transit, and other perils. One of the surest ways to secure a small business is to insure it!

Small business insurance offers financial protection against a myriad of risks, such as:

  • Earthquakes and floods
  • Machinery breakdown
  • Legal action against your company

And a lot more.

We have compiled a comprehensive list of small business insurance policies that will provide your business with sufficient, well rounded protection:

1. Fire and Special Perils insurance

A comprehensive insurance policy that every business can benefit from! This policy insures assets like building and structures, plant and machinery, stocks, and other assets against loss or damage caused by fire, explosion, riots, strikes, land slides, lightning strikes, floods, and other perils.

There are three main Fire Insurance policies that cater to different businesses based on turnover- The Standard Fire and Special Perils policy (SFSP), Bharat Laghu Udyam Suraksha policy (BLUS), and Bharat Sookshma Udyam Suraksha policy (BSUS).

2. Burglary and theft

It is important to secure stocks and valuables kept at your shop, office or factory from being stolen or damaged during a burglary. Burglary and theft insurance is an ideal financial protection for such risks. This policy will reimburse you for the market price of the insured assets that have been lost. But keep in mind that there are certain limitations to the kind of asset you will be covered for, which depends on your insurer.

This policy is usually offered as a package along with Fire and Special Perils insurance.

Learn about this policy in detail here

3. Commercial Motor Insurance

If you use motor vehicles for your business activities, buying a commercial motor insurance is vital, since any loss or damage to these vehicles can cause huge financial casualties that will be hard to recover from. Depending on your business model, there are different types of policies available such as Passenger carrying Vehicle (PCV) Insurance, Goods Carrying Vehicle (GCV) Insurance, and policies that cover movable plant and machinery. These policies insure against loss or damage caused to your vehicles, and any death or injury caused to the vehicle’s driver/owner, its passengers, and third parties.

Learn more about Commercial Vehicle Insurance policy here

4. Engineering Insurance policies

Engineering acts as the backbone of every construction and development project. Whether you are expanding your business or building your first factory/office, there are various engineering activities that you need to engage in. These large scale projects are accompanied by a large number of risks, and that is where policies like Contractor's All Risk (CAR), Erection All Risk (EAR), Industrial All Risk (IAR), Contractor’s Plant and Machinery policy, Machinery Breakdown Insurance, and many others come into the picture. These can offer comprehensive covers against all losses that may occur during developmental projects, civil engineering projects, and other construction work.

5. Marine Cargo Insurance

Marine insurance covers loss or damage to cargo/goods in transit (between points of origin and final destination) against risks such as fire, lightning, collapse of bridge, collision, and other accidents. The goods in question may be transported via water, air, road, rail, registered post or parcel, courier, or any of their combinations.

Marine cargo insurance comes in different categories like Single Transit for business who ship goods only occasionally, Open Cover for export and import merchants dealing in international trade, and Open Policy for large businesses who deal with numerous transit transactions.

Read about what Marine Cargo Insurance covers and doesn't cover here

1. Workmen's Compensation

In India, employers are legally liable to provide compensation to certain classes of workers in case of accident, injury or death. A Workmen’s compensation insurance policy is a way to financially cover this liability. Through this policy, employees working in factories, manually propelled vehicles, mines, plantations, etc. can be provided compensation for bodily injury, death, partial or total disablement, among other things. This policy is also now known as Employee Compensation Insurance.

Learn more about Workmen's Compensation Insurance here

2. Director's and Officer's (D&O) Liability

This liability cover provides financial protection to the directors and officers (board of directors, executives, managerial employees, etc.) of your company against legal action arising out of any wrongful act conducted by them in their managerial capacity. This covers risks such as regulatory investigations, accounting irregularities, sexual harassement and discrimination charges among other things.

Learn more about D&O Insurance here

3. Professional Liability

Professional indemnity insurance covers businesses and individuals against damages caused to third parties during the execution of their consulting or other professional services. This policy is also known as Errors and Omissions Insurance and is aimed at protecting your company and its subsidiaries against any legal action arising from negligent acts or omissions. This policy is ideal for consultants, medical professionals, media companies, financial institutions, among others.

Learn more here

4. Group Health Insurance

The most important resource your business has are its employees. Hence, investing in Health Insurance for them is a great way to provide them with financial protection in times of need. A Group Health Insurance policy provides comprehensive health cover to a group of employees and can be extended to their families as well. This insurance policy is cheaper than individual health covers and the premiums are usually borne or subsidized by the company.

5. Group Personal Accident Insurance

This is similar to a Group Health Insurance cover in that it provides cover to a group of your employees. However, Group Personal Accident Insurance, as the name suggests, covers all expenses associated with accidents. Through this policy, employers can give their employees comprehensive coverage including accidental death cover, permanent disability, ambulance charges, change in lifestyle expenses, etc.

Is Insurance mandatory for businesses? Learn about some compulsory Business Insurance policies here

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.