What is Business Risk?
Business risk refers to a threat to the company’s ability to achieve its financial goals. In business, risk means that a company’s or an organization’s plans may not turn out as originally planned or that it may not meet its target or achieve its goals. Such risks cannot always be blamed on the owner of the company, as risk can be influenced by various external factors, which may include rising prices of raw materials for production, growing competition, or changes or additions to existing government regulations.
Many things in life — driving a car, traveling, buying a home, growing crops, starting a business, even choosing where to live — carry an element of risk. And although not every risk is insurable, insurance products exist to help mitigate and protect against uncertainty and the potential for loss, injury, or damage from many of the common and not-so-common risks we take as individuals and as businesses. As part of the risk management process, we routinely buy insurance for everything. Beyond the cost of our premiums, most of us will never give insurance much thought until we find ourselves in the unfortunate position of having to make a claim against a policy.
Thus, Businesses should not neglect the importance of insurance. Businesses that are underinsured or do not have wide, appropriate, and adequate coverage are taking unnecessary risks that could result in major financial difficulties or even bankruptcy. A company requires insurance for a variety of reasons.
What is business insurance?
A business insurance is like a safety belt which offers financial protection to the business from various risks. Business is not just about profits; it faces various risks as well. Safeguarding the business from unpleasant events and mishaps is extremely important for the steady growth of the business. For this reason, more and more businesses are opting for business insurance.
What all Business Insurance Covers?
Business Insurance offers comprehensive protection against all probable risks and unforeseen events that a business can encounter. Organisations can opt for a customised portfolio as mentioned below:
Group Mediclaim: Also known as Group health insurance Plan, this is a scheme which insures all the employees and their immediate family members against medical expenses. This generally includes hospitalisation charges with the duration being at least 24 hours; It also covers 30 days pre-hospitalisation and 60 days post-hospitalisation charges.
Group Personal Accident: This is another type of Mediclaim policy under Business Insurance. Here, the expenses for unforeseen events like accidents are covered. The policy also provides compensation to the immediate family member (for example, parents/spouse) in case of accidental death.
Asset Insurance: This plan insures the assets of a company. This generally includes damage to buildings, service facilities, walls and gates. It also covers repair costs.
Marine Insurance: This insurance plan covers the expenses incurred due to loss/damage of goods during transit. This scheme generally covers transit damage caused through channels like railways/post/ courier/airways/roadways/sea.
Liability Insurance: This scheme insures the third party engaged with the company. This legal liability is usually seen in manufacturing, construction and warehousing industries. This generally includes accidental deaths, disease or injuries and property loss or damage.
Fire Insurance: This covers expenses incurred due to loss/damage of property due to fire breakouts. Some of the policies even insure property loss/damage done by natural calamities (like earthquakes, storms, and floods).
Burglary Cover: In case of theft, the insurance company provides the expenses. This policy covers cash, jewellery, and valuable products.
The companies might also ask for some additional inclusions in the policy. These include-
Neon Signs: damage is caused due to riot, theft, or accident.
Electronic equipment: Unforeseen damage caused to printers, computers, and power backup.
Plate glass: Breakage caused within the office premises.
Baggage: If the business involves frequent travelling, loss of luggage of both the insured and the employees can be covered.
How Business Insurance Functions?
After buying a business insurance, your next step should be to understand the functioning of the insurance so that you can make claims, in case of any untoward incident. Let us see how it functions.
- Apply for the business insurance
- Insurer checks the eligibility of the business for the insurance
- The premium is calculated based on the business size; revenue generated by the company
- The business pays the premium as per the contract
- In case of any unforeseen event, the business applies for the claim amount
- The insurance company validates the claim
- In case the claim proves to be genuine, the insurance company settles the claim by paying the amount; else rejects the claim
Advantages of Buying Business Insurance
Business insurance is heart and soul of business-risk management. Some benefits of getting a business insurance are:
- Compensates loss of income
- Secures the employees in case of medical issues, which ultimately motivates them to perform
- Improves credibility of the business in the eyes of clients and employees. Some clients might not enter a contract if the business is not insured.
Fire Insurance and how important it is for business
Accidental fire, explosions, lighting, and other fire events are covered by fire insurance. It is a legal contract between a policyholder and an insurance company that assures, the insurance company will pay for any loss or damage to the policyholder’s property caused by a fire.
Fire incidents are common at the workplace. Besides analysing profits and losses a business owner is also required to measure every possible risk that can emerge in the future. The most common reasons for fire outbreaks are carelessly cooking, electrical malfunctions, smoking in the office space rather than smoking in the no-smoking area. All small business owners need to take precautions and reduce the risk of a fire.
Having fire insurance at a Business Owner Policy (BOP), the policyholder will be provided coverage regarding:
- Improvements, office furnishings, and improvisations
- A new property
- Physical loss or damage to a business’s personal property
- Lost business income due to fire incident.