Insurance products covering life, health, and assets of individuals and families are well understood by consumers. But insurance products that are available for addressing risks facing small business owners and professional service providers have largely remained under the radar. Operating independently has its perks but the self-employed must be prepared to handle a wide range of risks, which otherwise could have been well hedged under a corporate umbrella. Apart from the risks that are common to individuals as well as businesses, risks from third party liabilities, professional indemnities, and burglaries can increase the income volatility faced by the self-employed.

Place of business

Home insurance often does not protect business activities, for which Fire and Burglary Insurance may be more suitable. These policies, also including a standardized policy - Bharat Laghu Udyam Suraksha, are designed for factories, workshops, godowns and service centers. Owing to being operated in either remote locations or locations with high foot traffic of employees, customers, and contacts, a regular home insurance may be insufficient. The basic fire and burglary plans cover theft (forceful or persuasive entry by gaining confidence), fire protection, impact of natural calamities, and other common property risks. Add-ons include strikes and riots, cash loss, jewellery, and malicious damages which may be included in basic policy or at an additional charge in the premium. The insured can choose a sum insured ranging from Rs.50,000 to 50 crore in such policies covering building, machinery, plant and stock. The premium for this will primarily be dependent on the pincode and scope of coverage opted. For instance, a sum insured of Rs.30 lakhs (buildings and content) for a pincode in Chennai would require a premium of Rs.9,250 per year from United India Insurance Company’s Fire and Burglary insurance or Rs.3,500 with Go Digit’s insurance plan.

Policies specific to shop owners and offices are also available which offer further customization over and above the general policy described above. Shop keepers’ policy which is suitable for business owners in prime areas places a higher emphasis on natural or manmade calamities including fire damage, interior damage and loss of stock, which are the principal threats for shop owners. The office insurance covers are customized to cover dishonest acts of employees including misrepresentation for personal gains, misuse of official information and fraudulent activities.

Third party liability protection

Third party liability cover in motor insurance provides cover against legal action from others in case of an accident. The same principle of protecting against legal claims arising in course of business and professional and directorship roles, is achieved with specific covers. There are General Liability covers which protect against financial or legal claims or specific covers including professional indemnity or directors’ and officers’ liability. Professional indemnity cover is available for architects, doctors, engineers, CAs, and lawyers, but is largely taken by professionals in medical services. The doctor’s indemnity policy available to registered medical practitioners covers against liabilities arising out of errors or omissions. While large organizations employing such professionals buy the cover in bulk, freelancing professionals, even outside of the medical profession, should consider the cover if their services can turn libelous with significant human or financial costs.

Directors’ and officers’ liability insurance provides cover against legal expenses when organizational management is sued. A directorship role in an organization can expose an individual to legal proceedings at any time (surfacing from previous stints as well) and hence such cover can be useful from a personal level.

Also read

Rising premium growth and recent government reforms to strengthen profitability of Indian insurers

Employee health and life

Employee insurance is largely limited to workman compensation insurance. The policy covers employers’ liability in death, disability, and injury to an employee on a worksite. Post-pandemic, group corona insurance has been made mandatory by the government to return to work in some industries. Group health and life policies for employees can provide low attrition and improve productivity, provide tax exemption, and protect employers against liability in case of workplace accidents. Besides, group covers provide better terms on previously existing diseases, maternity covers and medical underwriting standards, and are priced better than individual policies.

There are other smaller but equally important products to cover appropriate risks. Since the pandemic, there has been an exponential growth in digital payments and online transactions. Cyber insurance with emphasis on online fund transfers is essential for most small businesses and even more so for entities transacting with overseas banks and institutions. Other more specific policies for small businesses involved in construction and civil engineering include construction, erection and contractors’ insurance which provide cover against destruction of or damage to different construction projects or equipment.

The self-employed must properly understand the potential risks and their likely impact and insure themselves with the right product.

Why
Fidelity, burglary and riots are apt risk covers for small businesses
Indemnity from third party can find application beyond medical services
Exponential growth in online transactions calls for cyber insurance
comment COMMENT NOW