Why Every Business Needs Business Insurance

Why Every Business Needs Business Insurance

You might be thinking, "What's the point of buying business insurance if I am not affiliated with an industry that is prone to lawsuits or natural disasters, or don't have valuable inventory?" But Business Insurance is something which can protect your business from lawsuits and help you live a peaceful life.

Business insurance is not a widely known thing, at least not in India. Currently, only 5% of businesses are insured. There is lack of awareness towards Directors & Officers insurance, Errors & Omissions insurance, Cyber Insurance, Product Liability and General Insurance.

Even some of the unicorns are not aware of it. And by the time they realize the importance, it’s too late. So let’s dig deeper into why not one, not some, but almost all businesses need insurance.

Table of Contents

What do you mean by Business Insurance?

What are two broad categories of business insurance?

What are the most demanded business insurance products in the market?

Why should I take business insurance?

FAQs

What do you mean by Business Insurance?

Business insurance is basically protecting your business assets on a gloomy day. Now, what are these gloomy days? It could be a workplace crime, product misuse, data theft, lawsuits, and much more.

Insuring your business is vital. It helps protect them from losses due to unfortunate occurrences that may happen during the normal course of business. There are many types of insurance for businesses, including property damage coverage, legal liability coverage, product liability coverage and D&O insurance. 

What are two broad categories of Business Insurance?

The two broad categories of business insurance are assets and liabilities insurance. Under assets insurance, fire and marine insurance are highly popular. Liabilities insurance includes Commercial Crime, Directors & Officers, General Liability, Errors & Omissions, Product liability, and Cyber Crime Insurance.

Which are the most demanded business insurance products in the market?

Liability Insurance

Assets Insurance

Directors & Officers Insurance

Fire Insurance

Errors & Omissions Insurance

Transit Insurance

General Liability Insurance

Marine Insurance

Cyber Insurance

Machinery Breakdown Insurance

Crime/Fidelity Insurance

 

Product Liability Insurance

 

 

*Each of the insurance type has been explained in FAQs

Why should I take business Insurance?

Business insurance protects us from the losses. Any business may face unexpected losses. Some losses can be handled and adjusted for, while others drain your sheets out. Some other very common examples of loss are employee or partner dishonesty, a minor mistake by your team turning big, a competitor filing a lawsuit, employer-employee disputes- the list is endless.

Data theft and forgery are very common these days. Data sells for large bucks. A common myth prevails that only data-heavy and IT companies face data loss.

It is quite the opposite when we look at theft cases because data companies take high data security and insurance measures hence they are prepared for cybercrimes.  whereas other industry companies are not.

Here’s an example of a recent client with BimaKavach

An aluminum company extrudes aluminum on a large scale. Their daily cash flow is ₹ 1 crore. They took measures for the protection of raw materials. However, they faced data theft leading to heavy losses. Being a manufacturing company they didn’t envision facing data fraud. Later on, after the incident, they came to get a cyber insurance policy with BimaKavach.

 How business insurance protects and helps in growth of the company?

Business insurance helps you get better deals and funding

Buying insurance for your business is a sign of effective risk management. It is considered a smart move in the entrepreneurial space. It shows your potential customer, investors, and board members that you take risks seriously and are prepared for varied scenarios beforehand. Some big deals even mandatorily require both parties to have proper insurances in place in case anything goes wrong. So already having it will speed up the process.

Moreover, if you are a start-up and wish to apply for either a business loan or venture capital funding, having directors’ and officers' insurance will go a long way. It will help you get cheaper loans and easy funding. This is because when someone is investing in your business, they need to be sure that at least their assets would be protected on a rainy day.

Business insurance attracts the brightest minds to your company

Directors and senior officers feel confident in joining your organization when you have Directors & Officers insurance. This is a “must-have” policy for businesses that have been incorporated, are raising funds, or have corporate boards. It safeguards the personal assets and legal liabilities of directors and officers as well.

Business insurance gives you risk assurance

You must’ve heard, “oh jobs are so much more peaceful, running a business has a hundred headaches every day” which is true on some level. As a founder, you try to control all aspects, but uncertainty is a big thing in business.

Having business insurance will assure you that even if something goes horribly wrong (employee fraud, theft, fires, natural calamities) your business and years of hard work won’t go down- insurance will take care of it.

 Insurance costs higher if taken after an event triggers

Business insurance costs way higher if you take it after an incident has taken place. This is because the entity is considered vulnerable to accidents and thus high premiums avail. In our aluminum manufacturer case study, they had to pay double the premium after the data theft in comparison to what they would have paid if taken earlier.

This is why start-ups and new businesses prefer insurance right from the get-go. Low premiums, high coverage, and effective risk management are the best insurance policies.

FAQs

What is Directors & Officers insurance?

This policy, also called directors liability insurance, covers the legal liabilities of directors, CXOs, and board members in a case where they get indicted for managing the business.

What is Error & Omission insurance?

Errors & Omissions insurance is required if your business makes a tech product or provides a service. Even if lawsuits are filed against you, this type of insurance can help to protect your financial welfare.

What is general liability insurance?

General liability insurance is standard for all businesses and can protect you against accidental bodily injury or damage to property that didn’t happen in your place of business.

What is cyber insurance?

 Cyber insurance protects businesses from risks on the internet by helping minimize their losses.

What is crime/fidelity insurance?

Fidelity Insurance is for organizations who might be at risk for theft through social engineering or other fraudulent acts by employees and third-parties. It covers the losses resulting from such crimes as hacking, fraud, embezzlement and more.

  What is product liability insurance?

When you're in business, there's a risk that you'll make or sell a product that causes injury to someone else. Product liability insurance can protect you and your company against the legal and financial responsibilities that may arise as a result of your product hurting someone else.

  What do you mean by fire insurance?

Fire insurance covers the risk of property loss caused by fire. A fire insurance policy covers losses that the insurer has experienced due to damage to or the destruction of your property, caused by a fire. This coverage is specified over a period of time and up to an agreed amount.

  What do you mean by machinery breakdown insurance?

The Machinery Breakdown coverage is a customizable solution that can protect your business from sudden and unforeseen physical damages caused by things like natural disasters. This policy encompasses a wide variety of machinery, even your computer equipment.

  What do you mean by marine insurance?

Marine insurance covers the loss or damage of a ship, including cargo, terminals, and any transport by which the property is transferred, acquired, or held between points of origin and destination.

What is transit insurance?

 Transit insurance is an insurance plan which covers the risks faced by goods when they are being transported from one place to another. The policy covers being transported by air, water, road or rail.

Business insurance is one of those things that you hope you never have to use, but it's there as a safety net in case something goes wrong. No matter how big or small your business is, it's always a good idea to have some form of business insurance in place. We hope that this has given you some food for thought and that you will consider taking out a policy for your own business.

Is business insurance helpful for small businesses?

As a small business owner, you may have more personal financial exposure than someone in another industry, which is why it's even more important to carefully consider your needs and evaluate the coverage you need. If you don’t feel confident assessing business risk and what kind of coverage would be best for your situation, get assistance from BimaKavach.