Why do MSMEs need Insurance?

Uncertainty, risk and insecurity are incidental to any form of business. This makes insurance indispensable for a business organisation, including MSMEs. An insurance policy provides following benefits to business entities:

  • Protection : it provides protection against risk of loss and a sense of security to the businessmen.
  • Diffusion of risks : as the burden of loss is spread over a large number of people.
  • Credit standing : of the firm is enhanced as the businessman can easily transfer some of his risks to an insurance company.
  • Continuity and certainty of business : if all the risks were to be borne by the businessmen themselves, the business operations would have been uncertain and halting in character.
  • Better utilisation of the capital of the firms : as the Insurance companies take over the risk, it enables the business firm to invest and optimally utilise its capital.


Types of Insurance

There are two main types of insurance available to various individuals and business entities namely: Life Insurance and General Insurance.

To read more on what is life insurance, various types of life insurance policies, etc, click here.


Categories  of General Insurance that MSMEs can Leverage

1. Individual Policies: - Motor Insurance, Home Insurance, Health Insurance, Travel Care Policies, Personal Accident Insurances and Loan Shields.

2. Commercial Policies: - Standard Fire and Allied Perils Insurance, Burglary Insurance, House Holder’s policy, Shop Owner’s Policy, Office Package Policy, Marine Cargo and Marine Hull, Commercial Package Policies, Money Insurance, Group Mediclaim polices falls under Commercial Insurance Plans.

3. Engineering Policies: - Engineering policies mainly covers manufacturing and industrial units. Machinery break downs, wear and tear, third party liabilities caused etc are covered under engineering policies like - Contractor’s Plants and Machinery Insurance , Machinery Break Down Policy.

4. Agricultural Insurance: - Cattle / Livestock Insurance, Elephant Insurance, Dog Insurance, Brackish Water Prawn Insurance, Silkworm ( Sericulture ) Insurance, Horticulture / Plantation Insurance, Kisan Agriculture Pump set Insurance, Weather Insurance etc, are some attractive products under agriculture insurance.

5. Liability Policies: -

  • Commercial Liability Insurance protects your business in the event of a lawsuit for personal injury or property damages. General Commercial Liability Insurance covers your business from third party injury claims, property damages, and advertising claims.
  • Small manufacturing units as well as products can be protected in the event of a person becoming injured as a result of using the product by a Product Liability Insurance Cover
  • Professional Liability Insurance is useful for business owners providing services which protect them from professional errors and omissions. This coverage protects your business against business errors, negligence and omissions.
  • Workmen’s Compensation Policy: The need of insuring the workers in manufacturing / industrial units is high, as the business owner is also liable for the injury / accident caused to them while at work. The amount of coverage and the level of risk depend on the nature of each business.
  • Tailor made package policies combine categories which come under one roof.
    • Office Package Policy may combine the coverage for fire, burglary, infidelity, money and personal accident
    • Similarly a Commercial Care Policy covers fire, burglary, money and public liability


Tips for MSMEs on Buying General Insurance

  • Assess your Assets
  • Get the Right Insurance Broker
  • Go For Package Insurance Policies
  • Compare coverage, product features and limits
  • Read the underwriting guidelines carefully
  • Belong to an Association to benefit from better deals


Click here to access the source article of the above information on General Insurance for details.

Click here to access a List of Life Insurers published by Insurance Regulatory and Development Authority (IRDA)

Click here to access a List of Non-Life Insurers published by Insurance Regulatory and Development Authority (IRDA).