Business insurance for MSMEs: 7 questions owners forget to ask
Most small businesses are under-insured until something goes wrong. These are the questions I ask business owners before they buy or renew a policy.
Key takeaways
- Most MSME owners buy a policy because a bank asked, and discover the gaps only when they claim.
- Insure property and stock for today's replacement cost, because under-insurance can reduce a claim proportionately.
- Business interruption, liability, employee, transit and cyber cover fill gaps a basic policy often leaves.
- Review every policy with your advisor once a year against what your business looks like today.
Insurance is one of the areas I care about most at The Harsmit Ventures, partly because it is one of the most misunderstood. Most MSME owners buy a policy because a bank asked for it, renew it without reading it, and discover the gaps only when they make a claim.
Before you buy or renew, ask these seven questions.
1. Is my stock and property insured for what it would cost to replace today?
Under-insurance is common. If your factory, machinery or stock is insured for less than its real value, a claim can be reduced proportionately. Review the sum insured every year, especially after you add machines or stock.
2. What happens if my business stops for three months?
A fire or flood doesn’t only damage property; it stops income while fixed costs continue. Business interruption (loss of profit) cover pays for that gap. Very few small businesses have it.
3. Am I covered if someone gets hurt or a product causes damage?
Public liability and product liability cover claims from customers and third parties. If you manufacture, export or run a space where visitors come in, ask about these.
4. Are my employees covered?
Group health insurance is now one of the strongest tools for hiring and keeping good people. Employee compensation cover protects you if a worker is injured on the job.
5. Is my goods in transit covered?
If you ship goods to customers or receive raw material, marine or transit insurance covers damage and theft on the way.
6. What about cyber risk?
If you collect payments online or store customer data, a cyber policy can cover fraud, data breaches and the cost of recovery. It is affordable and increasingly relevant.
7. What exactly is excluded, and how do I claim?
Read the exclusions. Ask your advisor how a claim works, which documents you will need and how long it usually takes.
The right time to understand your policy is when you buy it, not when you need it.
A simple habit
Once a year, sit down for an hour with your advisor and review every policy against what your business looks like today. If you’d like a neutral second look at your coverage, THV can help you compare options from different insurers.
This article is general information, not advice for a specific policy. Coverage, terms and exclusions vary by insurer.
FAQ
Frequently asked questions
What is business interruption insurance?
Business interruption insurance, also called loss of profit cover, pays for the income gap when your business stops after an event like a fire or flood. Such events don't only damage property; they stop income while fixed costs continue. Very few small businesses have this cover, so it is worth asking about before you buy or renew a policy.
What happens if my business is under-insured?
If your factory, machinery or stock is insured for less than its real value, a claim can be reduced proportionately. Under-insurance is common among small businesses. Review the sum insured every year so it reflects what it would cost to replace your property and stock today, especially after you add machines or stock.
What insurance does a small business in India need?
It depends on the business, but the key covers to ask about are property and stock, business interruption, public and product liability, group health and employee compensation, marine or transit cover for goods, and a cyber policy if you collect payments online or store customer data. Always read the exclusions and ask how a claim works, because terms vary by insurer.