Guard your Enterprise

Chandralekha Mukerji        Print Edition: February 2013

Good businesses thrive on taking risk. It's the nature of earning a profit. However, it would be foolhardy not to take precautions when you should. Therefore, buying sufficient insurance is prudent, even for small ventures. While needs would vary depending on type and scale of operation, there are some covers that are essential for all businesses .

There are 'package' policies, such as HDFC ERGO's Business Suraksha, Tata AIG's Small Business Package Policy and National Insurance's Office Package Policy, that provide comprehensive protection against various contingencies such as fire, burglary, personal accident, third-party liability, and so on. These plans are convenient as you insure various assets through a single plan.

There are also stand-alone policies sold by general insurers, wherein you choose to make a customised portfolio. If you have set-ups in multiple locations, some policies - such as the fire and burglary covers - offer a floater option, which means a single policy will suffice for all locations. These are annual plans and have to be renewed every year.

Whichever option you choose, make sure you have these basic covers to protect your livelihood from both external and internal threats.

INSURE YOUR ASSETS

Cover from fire and allied perils: This plan is a basic cover against loss because of a fire, be it accidental or malicious damage. Apart from this, these policies are usually packaged with inbuilt cover for damages caused by natural calamities such as earthquakes, floods and storms. Some stand-alone policies even cover riots, strikes and acts of terrorism. However, any loss resultant of gross negligence will not be reimbursed.

Protection should cover office premises, including the elevators, boundary walls and fences, and its contents, such as furniture and fittings, office equipment and electronics. Make sure to declare all expensive items stored, along with related documents, or the insurer will not obliged to cover these.

Business interruption and consequential losses: A fire can interrupt operations and consequentially affect profits. Therefore, general insurers also have a specific plan to protect your business from loss of profit as an extension of the fire insurance. These policies typically cover loss of gross profit (net profit plus standing charges) due to reduction in turnover or output, additional cost to avoid reduction in turnover and the auditor's fee. Some policies may also reimburse the rent for alternative space if the premises are unfit for occupation.

Burglary cover: A cover against theft and burglary is indispensable. Apart from loss of property, it also covers damage caused during a burglary or an attempted burglary. Exclusions include loss of jewellry, title deeds, business books (unless specifically insured), plate glass and items covered under a parallel policy, say, fire insurance and theft by family or employees and shoplifting.

In case of loss, the policy pays for the loss incurred depending on the sum insured. So, it is important that the sum insured be equal to the market value of all the items covered in order to be able to get the replacement cost of the items damaged or stolen.

Money insurance: A fire or burglary cover will usually not protect hard cash or variations of it. For that you would need a special 'money' insurance. Not just currency, this policy also protects bank drafts, cheques, postal and pay orders, both kept in a safe or during transit. Loss from robbery or an accident would be reimbursed.

However, there are some broad exclusion as well. For instance, any loss due to error or omission, fraud by an employee, money lost or damaged in transit by post and loss of money when in personal custody of an authorised employee for over 48 hours are not covered by such plans.

Data protection: A fire or burglary policy covers physical damage and loss to your computers and laptops. But what about the cost of recovering the information stored in the machines? It's often just as much a loss as the cost of replacing the computers and information drives. A separate electronic equipment policy will cover loss of all data and information stored in them and pays for the cost of reinstatement.

PROTECT AGAINST LIABILITIES

General third-party liability: A commercial general liability plan covers a range of liabilities faced by a business. The major protections available are against bodily injury (includes mental ailments resulting from physical injury), damage to property, advertising injury (liabilities arising from the insured advertising his goods or services such as libel, invasion of privacy, copyright infringement, and so on) and legal liability for the insured business because of a personal injury to a third party (such as charges of harassment and discrimination).

Professional indemnity: If your business provides any professional service, this one is a must. Also, known as an errors and omissions (E&O) policy, such a plan provides insurance against third-party legal liability arising out of errors and omissions or negligence while rendering a service. The most commonly covered professionals include engineers, architects, chartered accountants, lawyers, interior decorators and management consultants.

Of course, errors are not restricted to humans alone. Machines can falter as well. Since modern businesses are highly dependant on machines, it is advisable to have an information and network technology E&O cover for your business.

Fraud control: A fidelity guarantee policy insures against any direct monetary loss to the insured business due to an act of 'duplicity' (meaning deception) or 'fraud' by an employee of the organisation while at work. Policies can be taken in the name of one specific individual, for example the company accountant, or you also have the option of taking a collective policy for the entire staff.

Another must is a fidelity cover for a select group that is based on designations, say, a policy to cover all managers, store keepers, accountants and cashiers.

Workmen compensation policy: A third-party liability cover doesn't insure your business's liabilities towards the employees. However, according to the Workmen's Compensation Act, 1923, and Fatal Accidents Act, 1855, the employer is legally bound to pay compensation to employees for bodily injury, disability or death caused due to accidents that happen during the course of their employment and provide compensation for occupational hazards of a job. A workmen's compensation policy covers these monetary liabilities.



COVERING THE HUMAN RESOURCE

Key-man insurance: Some people are vital for the survival of your business. A key-man insurance plan is a term life insurance plan for an individual with a specialised skill, knowledge or business acumen, say a director, founder member, project manager or sales person. Like any other term plan, on the demise of this 'key man', the insurer pays a lump sum to the company as per the terms of the plan. This can help the business cope with the loss of the person and his participation in the business.

Group accident and medical insurance: As an employer, ensuring the well-being of your employees is not just a responsibility but important for the success of the business. Group personal accident and medical covers provide monetary support for your employees if there is a crisis without putting a financial burden on the business.

Make sure to buy a plan with features such as cover for an employee's family, reimbursements for day care procedures and maternity expenses, cashless facility, policy 'carry forward' facility (allows employees to convert their group policy to an individual personal cover when they retire or move to another company) and no age restrictions. Ensure that a personal accident cover has all three necessary benefits- cover in case of death, permanent total or permanent partial disability and temporary disability.

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