Building a practical general insurance portfolio for a small business

Most small businesses acquire insurance in fragments - a fire policy because the landlord asked, a motor policy because the law requires it, a group health policy because a good employee asked for it. The result is a set of policies that individually make sense and collectively leave the largest exposures uncovered.

Start by mapping, not by shopping

Before comparing any quote, write down what the business owns, what it owes, who depends on it, and what would stop it. Premises and their contents. Stock, at its peak seasonal value rather than its average. Plant, machinery and electronic equipment. Cash and stock in transit. Goods in the hands of third parties.

Then the obligations: contracts with indemnity clauses, employee headcount and payroll, the products you put into the market, the data you hold about customers. Each of these is a place where money can leave the business without any of your own property being damaged.

The four blocks

Property covers what you own. For enterprises below defined value thresholds, India has standardised products - Bharat Sookshma Udyam Suraksha for total values at risk up to ₹5 crore at a location, and Bharat Laghu Udyam Suraksha above that - which are worth using as a comparison baseline because the wording is identical across insurers.

Liability covers harm to others: public liability for injury on your premises, product liability for what you sell, professional indemnity for advice or services that go wrong. These respond to claims made against you, and the defence costs alone frequently exceed the eventual settlement.

People cover includes group health, group personal accident, and workmen's compensation where you employ workers directly. The statutory obligation under employee compensation law is not discretionary, and it is regularly overlooked by businesses that think of their staff as informal.

Interruption is the block most often missing entirely. Business interruption cover replaces the gross profit lost while you are unable to trade after an insured property loss. Rebuilding a warehouse does not put back the six months of revenue that were lost while it was being rebuilt.

The lowest premium is rarely the best answer if the exclusions leave the main risk uncovered.

Where small businesses most often come up short

Underinsurance on stock, because the sum insured was set at an average value and the fire happened in the week before Diwali. Sum insured on buildings set at book value rather than reinstatement cost. No business interruption cover at all. Public liability limits set at token levels that would not fund a single serious injury claim.

And policies bought from four insurers with four renewal dates, which makes it almost impossible to see the programme as a whole. Aligning renewal dates is an unglamorous change that improves everything downstream.

A review rhythm

Revisit sums insured annually against current replacement costs, not against last year's figures. Revisit the whole programme whenever the business changes materially - a new location, a new product line, a significant new contract, a jump in headcount.

Keep a single schedule listing every policy, its insurer, its sum insured, its renewal date and its principal exclusions. It takes an afternoon to build and it is the document that makes every subsequent conversation useful.