Retailing and insurance are closely related practices, as insurance gives an umbrella cover to the retail business, against several unforeseen risks. In modern times, a trader invests his whole life’s earnings on his business. But the happenings of the future cannot be predicted. Misfortunes can fall on any one at any time. A single jolt may completely wipe out one’s entire investment. The sole purpose of insurance is to protect the retailer from such a catastrophic loss.
Insurance, therefore, is an integral part of the retail business, which allows the retailer to stride on to his new ventures boldly and fearlessly, and that too at minimum costs, with a guarantee of recovering his losses from an insurance company in case of a mishap. The insurance premium rates are currently at the lowest, owing to fierce market competition amongst public sector and private sector insurance companies.
The insurance also becomes a mandatory requirement since every entrepreneur is financially attached to a banker or a financier for his various kinds of liens with the former. And the bankers too insist upon insuring the related property before allowing any transactions through them in order to save their interests if any mishappening takes place.
Direct losses may arise to building, property, and interests due to fire or allied perils. There may be several risks hovering over a retailer’s interests depending upon the nature of business, location of business and unforeseen events, like floods, earthquakes and riots. Besides these, there are other risks too, like theft, burglary and frauds which a retailer may have to seek cover for. It is virtually impossible for a retailer to buy protection for every conceivable loss. It is therefore, necessary to arrive at a compromise as to what cover one has to essentially choose for probability of risks at any given site or premises. Fire risk is the most commonly feared risk, because in case of any eventuality, it may completely devastate the property and reduce the owner to a pauper.
Let us identify what fire insurance in insurers’ parlance means and what risk package they normally offer.
Fire insurance policy
Standard fire policy usually covers fire due to any cause, subject to some exceptions which too may be covered with additional premium.
Insurers currently provide two types of standard fire policies based on class of property. And they are:
1. Non- industrial property, such as dwellings, offices, hotels, shops (located outside the compounds of industrial / manufacturing risks)
2. Industrial / manufacturing risks.
The policy is known as Standard Fire and Special Perils Policy. And it covers the following risks:
Explosion / implosion
Aircraft damage: loss, destruction of damage caused by aircraft or other aerial or space devices and articles dropped from there by accident.
Riot, strike, malicious damage and terrorism damage
Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation
Impact damage, i.e., damage or destruction caused to property due to impact by rail/road vehicle or animal by direct contact.
Bursting and / or overflowing of water tanks, pipes
Leakage from automatic sprinkler
Missile testing operations
Fire risk is defined as loss or damage to property through fire, flame and ignition. Therefore, fire through fermentation, natural heating and natural combustion are not covered. Burning of property by order of any public authority is also not covered. All the above counted risks carry their set definitions and are subject to the limitations and exclusions of the fire policy. The premium is charged on the insured’s estimated value of the property at the rates prevalent at the time of insurance, and the period of insurance is normally one year, which can be renewed year after year based upon latest stock position.
The insurers nowadays even modify the insurance policy to insured’s specific requirement. The modified insurance policy is commonly called as specific policy. The retailer/owner may also opt for add-on covers if he so desires in addition to the covers already provided under standard fire policy, like, spontaneous combustion, forest fire, earthquake (fire & shock), start-up expenses, terrorism risks etc. on payment of additional premium.
It is disheartening to note that retailers who require insurance the most are found wanting in availing insurance covers due to lack of awareness, apathy and little cost of premium. The insurance companies are located at every nook and cranny of the country, what is required is a visit to an insurance company’s office, filling up of a proposal form, depositing the premium and receiving the insurance policy. It really is no rocket-science.