Understanding insurance for businesses
Taking Insurance Cover
The owner of a business has to decide on the insurance coverage required for his scale of business. Business insurance is needed only where there is no way of otherwise recovering the losses or inadequacy of the recovery through other means. There is a limit to which a businessperson can absorb the losses arising out of fire or burglary and any anticipated loss beyond that limit has to be covered with insurance. If it is felt that the probability of loss is too insignificant for payout of insurance premiums annually, insurance cover may not be all that necessary. A small business practically is the hardest hit in the event of any loss and all said and done, it is therefore always wiser to take insurance cover by paying some premiums and getting a good night’s sleep.
What to be Insured
There are two basic things that should guide a businessperson to take a decision on insurance- the amount of insurance cover and things to be insured in the event of a loss. Clearly identifying the latter makes the estimation of the former easier. One has therefore to begin with the things required to be insured as a first step. The following items are usually needed to be protected by insurance in a business to recover loss:
- Machinery and equipments
- Stock or inventory
- Fixed assets like lands, factory sheds, buildings and fixtures
- Commercial and personal vehicles including vehicles of employees if used in business
- Important workers/employees of the business
- Major liabilities
- Potential disruption in business
The worthiest among the above should be determined for determining the amount of insurance cover. By worthiest is meant strictly those items loss of which will badly hit the business. A prudent business owner is cautious about paying premiums on unnecessary items. After determining the items to be covered under insurance, the next step is to select the type of coverage- whether to take cover against fire, theft, accidents, loss of employment, catastrophes or all of these. A business owner also should decide whether to protect the employees and customers by insurance.
Look at Options
After determining the amount of insurance coverage, the items to be covered and the types of coverage, the final step for a business owner will be to look around for an insurance package that suits his requirements best. He can either do it himself or utilize the services of a professional insurance agent to get the information for the best bargain. The insurance policies often contain restrictive and exclusionary clauses that may hamper the business and create future problems in case a claim under the insurance is made. There is also the option in that case to either go for a different policy or obtain endorsements on the existing policy for neutralizing the exclusionary conditions. An insurance policy can be altered by endorsements to become more beneficial for the insured. A homeowner’s insurance policy is the most suited for people engaged in home based business. While usually it does not cover office equipments like computer, etc. this gap can be covered by endorsement on the policy.