Commercial Insurance That’s Right For Your Business

Unless you are a very small business running without a lot of overhead and liabilities, it is a very good idea to have commercial insurance. Indeed, your financial safety could very well depend on it as commercial not only allows you to recoup your losses in the event of a disaster outside your control, but allows you get your business up and running again. Commercial insurance can also save the ruin of your business by those who would seek to benefit by suing you for damages they have sustained directly in your workplace or through the products and/or services that you market.

There are three components to commercial insurance, and you can buy policies that cover one or all of them according to the type and size of business you own. The first one of these, property insurance, is most similar to homeowner’s insurance. It reimburses you for damage to your place of business, whether through fire or damage from burglary. As with all insurance policies, you must be careful in making sure that you get the coverage you think you might need. Indeed, it can often be a good idea to get coverage for things you don’t think you will need, if the extra cost is reasonable.

Commercial liability insurance is also an important component of commercial business insurance. It guards against lawsuits brought on by customers, and allows you to be reimbursed for things like legal fees and settlement money. Some professions need liability insurance more than others. The healthcare profession, for instance, needs malpractice insurance as they work directly with patients’ health and a mistake here could be very costly. Malpractice insurance affects other professional fields as well, from architecture to accountants. Even businesses that sell a product may benefit from this insurance in the event that a customer suffers some injury or damages due to their company or product. Indirect damage, such as Errors and Omissions, can be covered under liability insurance. You can also be reimbursed if your product causes harm to a customer, or if a company vehicle causes the damage. Under commercial vehicle insurance, you can also get coverage that will reimburse you if your vehicle suffers any damage or is broken into. Remember that there are many frivolous lawsuits these days and even legal fees can have a devastating effect on a business. Commercial liability insurance can make the difference between whether or not your business survives such a lawsuit.

The third type of commercial insurance is worker’s compensation insurance, and this is to protect you as the employer from exorbitant expenses if your employee is injured while on the job. Most states in the U.S. require some form of this insurance, and it reimburses the employer for medical bills and days of work missed due to the injury, as well as lawsuits for employer negligence.

A Beginner’s Guide to Insurance

Having the right kind of insurance is central to sound financial planning. Some of us may have some form of insurance but very few really understand what it is or why one must have it. For most Indians insurance is a form of investment or a superb tax saving avenue. Ask an average person about his/her investments and they will proudly mention an insurance product as part of their core investments. Of the approximately 5% of Indians that are insured the proportion of those adequately insured is much lower. Very few of the insured view insurance as purely that. There is perhaps no other financial product that has witnessed such rampant mis-selling at the hands of agents who are over enthusiastic in selling products linking insurance to investment earning them fat commissions.

What is Insurance?

Insurance is a way of spreading out significant financial risk of a person or business entity to a large group of individuals or business entities in the occurrence of an unfortunate event that is predefined. The cost of being insured is the monthly or annual compensation paid to the insurance company. In the purest form of insurance if the predefined event does not occur until the period specified the money paid as compensation is not retrieved. Insurance is effectively a means of spreading risk among a pool of people who are insured and lighten their financial burden in the event of a shock.

Insured and Insurer

When you seek protection against financial risk and make a contract with an insurance provider you become the insured and the insurance company becomes your insurer.

Sum assured

In Life Insurance this is the amount of money the insurer promises to pay when the insured dies before the predefined time. This does not include bonuses added in case of non-term insurance. In non-life insurance this guaranteed amount may be called as Insurance Cover.

Premium

For the protection against financial risk an insurer provides, the insured must pay compensation. This is known as premium. They may be paid annually, quarterly, monthly or as decided in the contract. Total amount of premiums paid is several times lesser than the insurance cover or it wouldn’t make much sense to seek insurance at all. Factors that determine premium are the cover, number of years for which insurance is sought, age of the insured (individual, vehicle, etc), to name a few.

Nominee

The beneficiary who is specified by the insured to receive the sum assured and other benefits, if any is the nominee. In case of life insurance it must be another person apart from the insured.

Policy Term

The number of years you want protection for is the term of policy. Term is decided by the insured at the time of purchasing the insurance policy.

Rider

Certain insurance policies may offer additional features as add-ons apart from the actual cover. These can be availed by paying extra premiums. If those features were to be bought separately they would be more expensive. For instance you could add on a personal accident rider with your life insurance.

Surrender Value and Paid-up Value

If you want to exit a policy before its term ends you can discontinue it and take back your money. The amount the insurer will pay you in this instance is called the surrender value. The policy ceases to exist. Instead if you just stop paying the premiums mid way but do not withdraw money the amount is called as paid-up. At the term’s end the insurer pays you in proportion of the paid-up value.

Now that you know the terms this is how insurance works in plain words. An insurance company pools premiums from a large group of people who want to insure against a certain kind of loss. With the help of its actuaries the company comes up with statistical analysis of the probability of actual loss happening in a certain number of people and fixes premiums taking into account other factors as mentioned earlier. It works on the fact that not all insured will suffer loss at the same time and many may not suffer the loss at all within the time of contract.

Types of Insurance

Potentially any risk that can be quantified in terms of money can be insured. To protect loved ones from loss of income due to immature death one can have a life insurance policy. To protect yourself and your family against unforeseen medical expenses you can opt for a Mediclaim policy. To protect your vehicle against robbery or damage in accidents you can have a motor insurance policy. To protect your home against theft, damage due to fire, flood and other perils you can choose a home insurance.

Most popular insurance forms in India are life insurance, health insurance and motor insurance. Apart from these there are other forms as well which are discussed in brief in the following paragraphs. The insurance sector is regulated and monitored by IRDA (Insurance Regulatory and Development Authority).

Life Insurance

This form of insurance provides cover against financial risk in the event of premature death of the insured. There are 24 life insurance companies playing in this arena of which Life Insurance Corporation of India is a public sector company. There are several forms of life insurance policies the simplest form of which is term plan. The other complex policies are endowment plan, whole life plan, money back plan, ULIPs and annuities.

General Insurance

All other insurance policies besides Life Insurance fall under General Insurance. There are 24 general insurance companies in India of which 4 namely National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd are in the public sector domain.

The biggest pie of non-life insurance in terms of premiums underwritten is shared by motor insurance followed by engineering insurance and health insurance. Other forms of insurance offered by companies in India are home insurance, travel insurance, personal accident insurance, and business insurance.

Buying Insurance

There are an umpteen number of policies to choose from. Because we cannot foresee our future and stop unpleasant things from happening, having an insurance cover is a necessity. But you need to choose carefully. Don’t simply go with what the agent tells you. Read policy documents to know what is covered, what features are offered and what events are excluded from being insured.

1. Know your Needs

Determine what asset or incident must be protected against loss/damage. Is it you life, health, vehicle, home? Next determine what kinds of damage or danger exactly would the assets be most probably be exposed to. This will tell you what features you should be looking for in a policy. Of course there will be losses which cannot be foreseen and the cost of dealing with them can be very high. For instance nobody can predict that they’ll never suffer from critical illnesses no matter if they’re perfectly healthy at present.

The biggest mistake while it comes to buying insurance, particularly life insurance is to view it as an investment. Clubbing insurance and investment in a single product is a poor idea. You lose out on both fronts because for the premiums you’re paying more cover could’ve been got in a term plan and if the premiums were invested in better instruments your returns could’ve been several times more.

Be wary of agents who want to talk you into buying unnecessary policies like child life insurance, credit card insurance, unemployment insurance and so on. Instead of buying separate insurance for specific assets or incidents look for policies that cover a host of possible events under the same cover. Whenever possible choose riders that make sense instead of buying them separately. Unless there is a fair chance of an event happening you do not need insurance for it. For instance unless you are very prone to accidents and disability due to your nature of work or other reasons you do not need an Accident Insurance policy. A good Life Insurance policy with accidental death rider or waiver of premium rider or a disability income rider will do the job.

2. Understand Product Features and Charges

The worst way of choosing an insurance product or insurer is to blindly follow the recommendation of an agent or a friend. The good way to do it is to shop around for products that suit your need and filter out the ones offering lower premiums for similar terms like age, amount of cover, etc. All details you need about the product features and charges will be provided on the company’s website. Many insurance policies can now be bought online. Buying online is smarter because premiums are lower due to elimination of agent fees. If buying offline in case of life insurance, tell the agent that you’re interested only in term insurance.

Before you sign on the contract make sure you have understood what items are covered and what items are exempted from the cover. It would be so devastating to learn in the event of damage or loss that the item you hoped to cover with the insurance was actually excluded. So many people rush to their insurers after being treated for diseases only to realize that the particular disease was excluded. Understand details like when the cover begins and ends and how claims can be filed and losses be reported.

Don’t choose an insurance company because your neighbourhood friend is their agent and never let them coax you into buying from them. Insurance premiums run for years and it means a sizeable amount of money. Apart from the premiums charged look for the service provided. When you are faced with a peril you want the claims collection processed to be complicated with non-cooperating staff in the insurance company’s office. Seek answers from people who have had previous experience with the company for questions like how customer friendly and responsive the company is when it comes to handling claims.

3. Evaluate and Upgrade in Time

As you walk from one life stage to another or when the asset insured changes your policies must be reviewed. Perhaps your cover will need to be increased (or decreased) or you’ll need to top it up with a rider. Some instances when you need to review your cover are when you getting married, when you have children, when your income increases your decreases substantially, when you’re buying a house/car and when you’re responsible for your ageing parents.

Commercial Insurance Combined Policies

Commercial Insurance is a wide genre with many business types, covers and risks.

A commercial insurance combined policy is modular with a basic set of cover options included. This allows various risks and cover options to be added to the policy as desired by an individual business in an incremental fashion or at a later date during the policy term, if business needs require.

The modularity of the underwriting and premium calculation allows proposers to tailor the covers to fit their individual trade or business insurance requirements whilst retaining the widest range of policy options to cover all enterprises requirements, under the same policy wording.

Most commercial and business insurance is packaged in some way, with a basic blanket level of cover and indemnities to which further options can be added. However it is possible to buy standalone commercial insurance cover for public liability and professional indemnity insurance and also for most types of commercial property insurance, for example where just buildings cover is needed.

At the sales and marketing level, commercial insurance combined packages are differentiated and sold by the various trade and business types.

This is because different business types require differing liability and cover limits, depending upon the particular risks in that business sector. For example a shop insurance package may place high value on including window and glass cover in its package, however this wouldn’t be much use to a painter and decorator who is just looking for tradesman’s public liability and tools cover. Similarly the shop owner would not find much use for a contractors all risk option but requires goods in transit cover for his deliveries.

Good commercial combined packages allow flexibility in their underwriting to cater for all variations of trade risks and online services allow you to freely add and remove options to build up a combination of covers that suits your business risks and pocket.

A combined policy will always contain a liability section as standard. This provides options to add employers and product liability to the basic public liability cover.

If the business owns or rents commercial property then buildings and contents cover can be added if required. Certain combined policies, such as for office insurance will offer office contents as a separate option. Similarly a shop insurance package will offer cover for stock held in the premises.

Commercial packages aimed at various trades usually also offer a plethora of add-on options for an additional premium.

Some of the more popular of these covers include business interruption insurance or loss of profits insurance which covers a businesses losses whilst being unable to trade due to a claim. Professional indemnity insurance which covers negligent advice is available under combined liability policies. Fidelity guarantee insurance protects a business against fraud or theft of money by an employee. Group personal accident cover and income protection is often available on combined policies which cover staff against accident and sickness.