[ecis2016.org] The kind of insurance policy you choose for your commercial property, will depend on your specific set of requirements. Here are some tips to help you make the best choice
There are significant risks involved in any business, whether big or small. The risks can emerge from various sources and can be of different types. Some of the risks can turn your entire business upside down and starting from scratch, may be the only option left, unless of course if you have insurance against the risk. We take a look at various aspects of insurance for commercial property in India:
Commercial Property Insurance Premium
The premium is what you pay to the insurance company to get a monetary compensation on the happening of the risk against which insurance is taken. Thus, larger the risk, larger will be the premium. There is no one-size-fits-all insurance scheme and the premium for each property will depend on a number of factors and be arrived at after careful evaluation of the risk for that particular property. However, it will be safe to say that larger the property, more will be the premium. Some of the important factors that affect the premium are as follows:
Location or geography: The location of your commercial property for which you are taking insurance has an important bearing on the premium. The higher the crime rate in that location, the higher will be the premium. There can be certain specific risks in that geography that will impact the premium.
Age of the property : The age of the construction will also impact the premium. Older buildings would be more at risk of damage and hence, the premium will be higher. Old wiring systems can cause a fire hazard like short-circuiting and thus, the higher the age of the building, the higher will be the premium.
Type of equipment or material stored: The type of machinery or equipment used in the commercial buildings will also impact the premium. High-end and sophisticated machinery will cost more, hence, the premium will be more. The kind of material stored in the building will also have a bearing on the premium rates. If the material is highly inflammable, the risks from a fire will be higher and hence, the premium will be higher.
Tips For a Good Deal
Commercial property insurance policy is issued on a complex set of factors and valuations. The modern day business is getting more and more sophisticated and the policy can depend on a diverse set of aspects like the industry in which the business is operating, property type, the valuation of the assets of the business, deductibles, etc.
Coverage scope of the policy: It is neither wise to be over-insured nor prudent to be underinsured. The insurance coverage should be just adequate to cover the risks. A careful assessment of the risks involved in the business is necessary and that means asking all the insurance companies for their quotes and then deciding which is covering all the risks of the property. If your business is small or has just started, it will make sense for you to insure only the most important assets rather than all the assets of the business/company. You will have to see which asset is most crucial for your business.
Bundling of coverage risks: You should try and get several risks covered under one policy than to get several different policies. The cost (premium) of a policy in which all or many risks are covered is lower than getting separate policies for all those risks. This is called bundling of the coverage risks and is a wise way to get commercial insurance. The various risks can be fire, crime, damage due to violence, burglary, arson, wind, hailstorm, etc. Insurance companies have various offerings that combine two, three or four of these risks into one policy. However, the premium will differ even on apple-to-apple comparison of policies, that is, the premium for a policy from a company covering any set of three or four specific risks, will be different from the policy of another company covering the exact same set of risks. You must shop around for the best rates.
Hiring an expert: Sometimes it is not easy for a businessman to assess all the risks or to choose the best policy that has ideal coverage for the risks involved in the business. Even the insurance company may not be able to offer the best policy but an agent or broker who understands your industry may be able to point out all the risks that are involved and can guide you towards a policy that correctly covers all the threats prevalent in that industry.
It should be noted that commercial insurance does not cover natural weather phenomenon like earthquakes, volcanoes and floods. Even acts of war is not covered. As far as data theft or data breach by cyber attack is concerned, it is usually not covered but some insurance companies have started insurance cover for that recently.
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