The Indian economy has seen many start-up businesses emerge and evolve in the last few years. While some of these start-up owners have prior experience in their respective businesses, some are novices and even tight on money. But one thing that ties most of them is their fearlessness in taking on business challenges.
The Indian economy has seen many start-up businesses emerge and evolve in the last few years. While some of these start-up owners have prior experience in their respective businesses, some are novices and even tight on money. But one thing that ties most of them is their fearlessness in taking on business challenges. And while this risk-taking ability is worth applauding, it’s important that you have a safety net ready while you do the rope walk.
Being tight on money, buying insurance is many a times not a priority for the start-up owners. However, remember that it has the potential to protect you from any unforeseen financial losses.
Some common risks a new entrepreneur faces pertain to health, travel, accidents, contingencies and professional adversaries. Here are some insurances that you could consider bagging before you venture out into a new business.
Professional indemnity insurance
Professionals are exposed to legal risks arising from allegations of negligence in service. Doctors, CA, CS, engineers, architects, stock brokers, etc. are usually the ones at high risk of such instances.
Often the claims made for compensation are high and if the legal battle is lost, the financial liability could take a huge toll on the professional’s entire career and his finances. Professional indemnity insurance plans cover all financial risks arising due to the mistakes or errors committed during the offering of services. It doesn’t just offer protection to the insured professional but also to the staff and assistants working with him. Designed to reimburse the expenses incurred for defending a legal suit filed by any aggrieved customer, this insurance is offered by almost all general insurance companies. The extent of loss covered by the insurance company depends on the type of profession and varies from case to case. Some companies offer profession-specific covers as well. However, the objective of such insurance plans is to cover civil liability and leave criminal offence or law infringement out of its ambit.
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This one is to protect your business property and the equipment in it from perils such as fire, earthquake, flood, theft, or burglary – anything that’s listed in the plan. Considering yours is a start-up business, you don’t want the additional burden of making up for losses in case of a mishap. Property insurance is affordable and takes care of the recovery cost in retrieving the building structure and the goods inside. All you need to do is show the proof of the belongings kept inside the building to claim the cover.
There are a few key employees in every firm who contribute significantly and the business would probably suffer losses if such employees were to be unavailable for any unforeseen circumstances. A keyman insurance policy offers cover in case of demise of such employees. The insurance company offers monetary support for the losses incurred in the business due to the absence of a keyman and the premium paid towards this insurance is considered part of business expense.
Business Interruption Insurance
This policy provides protection against any loss incurred due to a disaster and it is different from a property insurance in the sense that it covers for more than just the physical damage. The additional coverage provided by business interruption insurance includes the profits the company would have earned, had it not incurred any losses due to the mishap. If a business makes losses due to the perils mentioned in the business interruption insurance policy, it is entitled to receive compensation for turnover loss, overhead expense burden, restoring production normalcy, employee salary or wages during breakdown, etc.
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Worker’s Compensation Insurance
In a new business, often the workers are untrained and the machines are untested, thus increasing the chances of accidents. A worker’s compensation insurance provides cover for medical cost, disability compensation and death of employees in a company. This is a must-have for new entrepreneurs.
Other Important Insurances
Apart from the insurance policies that are listed above, credit insurance to cover the loss caused due to debtor’s payment default, insurance for auto and business vehicles, travel insurance, accidental insurance for employees, group health insurance etc. are other policies that you could consider buying.
(The writer is CEO, BankBazaar.com)