Business Insurance: Why is it important in the modern era?

Business insurance falls under a class of insurance that seeks to protect the intellectual and physical assets of a business or firm from unprecedented events and risks pertaining to the business environment. It offers protection against events such as natural disasters, thefts, employee deaths, loss of income, etc. This insurance was what kept companies up and running during the current pandemic situation. A new business analyses the risks pertaining to a certain business environment and accordingly applies for a business insurance. These insurances are an umbrella insurance for various other insurances such as Mediclaim, employee health insurance, property insurance, and much more.

Business Insurance Policies in India

There are quite a few types of business insurance policies prevalent in India.

1) Liability Policies

These kinds of policies protect the business from third-party suing for claims. All legal fees are covered under these policies.

2) General Liability Insurance

This is the most basic business insurance policy ensuring that any damages to property or losses dealt to a third-party is duly covered. It also covers the entire legal fees of the claim processes by the third-party.

3) Professional Liability Insurance

This insurance protects the business from any damages caused or loss in the performance of a service. This is also known as the errors and omissions policy.  This basically protects the business against any negligence on its part to conduct a service.

4) Employee Insurance Policies

The Worker's Compensation Plan is an umbrella policy for Employee Welfare, and allows the business to recover the cost that arises from an employee's injuries and sickness. It also covers the legal cost in case the deceased's family press legal charges on the business. It is a compulsory insurance that every business is required to have.

5) Property Policies

Property policies help to insure the business against any property damage dealt to the business. Property damage might happen due to natural disasters, or malicious intent of others. Smaller business owners have a 40% risk of property damage. Insurance of inventory is also included in the property insurance.

6) Cover for Loss of Income

This kind of insurance helps the businesses to cover the fixed cost losses in cases of natural disasters, or bankruptcy.

7) Business Interruption Insurance

This business insurance is only for those businesses requiring a physical location like a retail shop. These kinds of businesses often face interruptions and disruptions in the normal business process flow due to several conditions such as riots, strikes, and natural disasters. The losses incurred due to such interruptions are covered under this insurance.

8) Product Liability Insurance

Product liability insurance is for businesses into the manufacturing sector. This insurance covers the lawsuit charges on damages and losses caused due to the products being manufactured.

Business Insurance Features

This might seem like a needless expense, but it is worth the money due to the following salient features:

• Recovers the losses caused due to natural disasters, such as fires, earthquakes, floods, etc.
• Covers losses due to theft and burglary
• Third party liability costs are covered
• The compensation for employee death and injury during the course of the employment in covered
• Loss of profits due to natural calamities, such as current pandemic is covered
• Losses due to Errors and Omissions are covered.

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Importance of Business Insurance

1. It reduces the risks of loss of profits by ensuring the appropriate loss coverage under its terms and conditions.
2. Risk of losses is reduced since the business insurance covers unprecedented losses to the business. This increases the business efficiency as well.
3. It insures the business against the loss of valuable employees, without whom the business might go into loss. The insurance covers the death, injury, as well as the absence of such an employee, also known as the key employee.
4. Business insurance can serve as a collateral for loan applications. These insurances also increase the credit scores of the companies, and serve as a guarantee to creditors that at the event of death of the borrower, the creditors will get the insured sum as payment.
5. Insurances protect businesses from losses due to discontinuation of partnerships due to death or falling out of the partners. The insurance payout is after the partnership breaks. This ensures that the business still continues even after the loss of a business partner.
6. Employee welfare is the responsibility of the company. Business insurance policies make sure that employee welfare is covered under the umbrella as well, thus providing the employees with medical benefits. This ensures that the company always has healthy employees and thus has no losses due to absence of employees.

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A final word

Business insurance policies are an integral part of the business. Each time a new business is registered, getting it insured should be the first priority of the business owner. A few mandatory insurances are needed during the registration of the business. But, ideally, all businesses should get the above mentioned insurances. This ensures that businesses don't face unprecedented losses due to negligence, errors, damages to health and property, or due to disasters.

There are many umbrella insurance policies provided by registered Insurance providers which give low cost premiums and higher insurance coverage to all aspects of a new business. With the amount of competition in the insurance market, the competitive pricing of many of the insurance policies. Business insurance policies have come a long way and have started covering accidental damage to people or property as well.

This type of insurance is an important aspect of the current business scenario in India, majorly the small business that are struggling during COVID-19 pandemic. The current pandemic situation showed the importance of insurance. It was due to the insurance that companies didn't become bankrupt and continued to pay their employees.

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