In the last decade small and medium enterprises have grown to be one of the most important sectors for our country. In a developing country like ours with a huge population which is young too, this sector plays a crucial role in the development of economy by providing employment opportunities especially in rural areas and generating revenue boosting growth. Government of India has left no stone unturned in providing necessary support to this sector by providing capital in form of easily available loans. Government also has encouraged entrepreneurship at various fronts and devised numerous programs like start up India, Skill India, and Make in India which will further boost up this particular sector.
As per Micro small and medium enterprises development (MSMD) Act 2006, for manufacturing enterprises – investment in plant and machinery should be up to 25 lakh rupee to be termed as micro enterprise, between 25 lakh and 5 Crores is termed as small enterprises and above 5 crores and up to 10 crores is termed as medium enterprises. Similarly for service enterprises metrics are defined for investment in equipment to qualify for micro, small and medium enterprises.
With their limited capital and resources SME companies can be in great difficulty in case an unwanted natural or manmade peril strikes. Their total capital and investments can be easily wiped out and they may not be in a situation to resurrect their business again which must have been taken a lot of efforts and hard work to stand. Taking insurance must be a part of risk management policy for SME. It will help to protect the business and its operations at a nominal cost which is the premium of the insurance policy. Various general insurers come with a special product for SME’s which is a package policy and incorporates all the necessary coverage business needs at a nominal cost.
SME package policy is more like an office package policy or a shopkeeper package policy which can be bought online at the click of a button or through an insurance agent. Buying such a policy online can save a few bucks on insurance premium as online policy discounts. If the business is a complicated one which involves sophisticated equipment and which needs some specialized coverage one may consult an insurance broker as well.
Before buying SME insurance one should know its basic form and structure and a few possible additional coverage so that they can protect their business and assets better. Below we will discuss what all coverage are there in a SME package policy and what are a few important points one should keep in mind while buying this product.
SME package policy in its general form will have the following sections
Section 1: Fire and special perils – Covers building, machinery, furniture fixtures and stocks from fire, natural perils like earthquake, flood and named perils like riot, strike malicious damage and others.
Section 2: Fire loss of Profit – Covers gross profit in case of business interrupted due to any peril insured as per above section. This can prove to be an essential coverage that covers business earnings in case of an untoward incidence happening for which business needs to be shut down for some time.
Section 3: Mechanical and electrical appliances – Fixed in office premises or used for business is covered for unforeseen accidental damage and electrical and mechanical breakdown.
Section 4: Electronic appliances – Computers, data processing equipment, system software, and other electronic appliances used for the business can be covered. Portable equipment like laptop and camera should be requested to insurer to be included in the policy.
Section 5: Theft and housebreaking cover is included for office equipment or business assets at premises. An FIR report can be mandatory while file a claim against this section.
Section 6: Loss of money in transit between office and bank, from safe or counter at office by burglary or housebreaking is covered.
Section 7: Fidelity guarantee: Monetary loss due to employee dishonesty like fraud, embezzlement or stealing is covered.
Section 8: Fixed glass, sanitary fittings and neon sign boards can be covered against various risks.
Section 9: Legal liability towards employees as per workman compensation and towards third parties can be covered with food and beverages extension.
Section 10: Baggage – Loss of baggage for proprietor or employees during an official travel.
One can like pick and choose sections from above and include those one considers necessary and remove those not required. Premium will be adjusted accordingly and will not be charged for the sections not opted. In addition to above sections one can look out and talk to the insurance company for incorporating –
- Keyman insurance – compensate the business in case of death or disability of the Keyman.
- Personal accident for employees and proprietors, Travel insurance as per business requirement
- All risk cover is also available for all assets which cover for any sudden and unforeseen damage due to any reason other than what is excluded.
- Health insurance should be taken separately covering all employees
The insurance manager of the SME should carefully consider other risks if any specific to the business and consult the insurer for grant of coverage. One should take time to read the policy wording carefully and pay attention to all the conditions and exclusions to avoid any surprises and claim getting repudiated at a later stage. In case of any query or questions one should be duly confirming the same with insurer or intermediary.