Skip to main content

Liability Risk & Insurance

Best SIP Funds Online 


In 2012, when we had just about set-up our insurance broking business, I received an email from a Chandigarh-based exporter. "Do you know what comprehensive general liability insurance is?" he asked. His American client was insisting on this as a precondition to doing business. The local branches of insurers, banks and sales persons had told him that this was a western concept not available in India. Last week, 5 years later, I had a feeling of déjà vu when another, larger Delhi-based exporter, called with exactly the same question. 

Liability remains a hazy concept not understood by the very people most exposed to these risks. Unless the risks are better understood, insuring them remains a distant objective. Swiss Re, in its Sigma report on Liability in Asia, estimates the Indian liability insurance market to be under Rs2,000 crore and just about 2.2% of the general insurance market. This puts India in the 9th position in Asia in terms of proportion and 5th in terms of absolute size. The annual growth of this product, over the past several years, has been slower than the industry. One reason for poor awareness and take-up rates is that claims paid have been few, despite litigation increasing rapidly. Claims as a proportion of premium have been about 40%, which is far lower than in other lines of business such as health and motor insurance. However, this will change rapidly as litigation continues to rise, more people buy this insurance and buyers understand how to claim. 

Liability risk refers to actions for which you can be held accountable, should something go wrong. The insurance does not remove the risk of litigation but pays for your defence and penalties. There are many liabilities you face but four, in particular, are important to know. These are: risks arising because of disgruntled customers; accountability for issues in the companies you work in or are on the Board of; injuries to people on your premises or using your products; and accidents involving your workers. These risks are real and ever increasing. 

Some professions are more vulnerable to irate customers. These include doctors, chartered accountants, advisers, architects and builders. Clients file cases if a medical treatment does not work out, tax advice turns out poor, constructed buildings have flaws, or delivery is delayed. A professional indemnity insurance covers such risks that come out of a perceived deficiency or negligence. 

Many of us work in companies or are directors. The more senior you are, the more accountable you will be held for the mistakes. The Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016, broaden the statutory responsibilities of directors and senior executives and also create provisions for penalties. These penalties can cross over company boundaries and encroach on your personal assets, particularly for directors. A case that I am familiar with involves a bank that sued a director for a loan default related to his company. When the director died, the liability was transferred to the heirs who had nothing to do with the loan or the company. Another case, described publicly, involved a start-up entrepreneur jailed because his company had allegedly not paid some vendor dues. A 'directors and officer's liability' insurance protects you in such situations. 

You are exposed to third-party litigation if you run a business that has outsiders visit your premises or manufacture items that could hurt someone, even inadvertently. Restaurants, factories, exporters, makers of consumer goods, auto-component manufacturers and many others face this threat. This can be insured by a 'comprehensive general liability' cover, the insurance that I referred to at the beginning of this column. 

Finally, if you are constructing a home or have a business that employs workers, then you are accountable for accidents they have at work. In cases of a death or disability, the courts decide the compensation under the Workmen's Compensation Act, 1923. This is an unlimited liability, which means there is no maximum level set for compensation. Such risks are insured by the "workers' compensation" insurance. 

Ask the following basic questions when you buy liability insurance. How much sum assured is needed? Will the insurer pay even if you lose the legal case? Will the insurer provide you advice on fighting your case? Will claims that may come up years after your action be insured? 

These questions are difficult to answer. Take the first one on the right level of sum assured. I asked this of a senior liability insurer who told me that you know you should have bought more if your insurance runs out. He was being facetious, of course, but the question remained unanswered. For professionals working on their own, a sum assured of Rs1 crore is a good place to start. As your business grows, this can be increased. For most liability insurances, this will cost under Rs20,000. If you lose the case, unless the damage is deliberate, the insurer will pay the claim. Practically, cases take a long time to settle so insurers may even press for early settlement. In liability claims, insurers are closely involved in your case. Sometimes they may suggest lawyers or even a line of defence. Finally, do remember these claims can come in years after an incident. Insurers will pay these claims provided you have renewed your insurance every year. As in your personal health and term insurance, timely renewals are key. 

A few months ago I was at the family vet, when a young girl asked if our dog bites. "Not at all," said the vet, over-confidently I thought. But then I recalled that the first liability insurance we sold was to the vet—to insure him for situations where someone got bitten in his clinic.



SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Mirae Asset Healthcare Fund

Best SIP Funds to Invest Online   Mirae Asset Global Investments (India) has launched Mirae Asset Healthcare Fund. The NFO of the fund will be open from June 11, 2018 to June 25, 2018. Mirae Asset Healthcare Fund is an open-ended equity scheme investing in healthcare and allied sectors. The scheme will invest in Indian equities and equity related securities of companies that are likely to benefit either directly or indirectly from healthcare and allied sectors. The investment strategy of this scheme aims to maintain a concentrated portfolio of 30-40 stocks. Healthcare is a broad secular theme that includes pharma, hospitals, diagnostics, insurance and other allied sectors. The fund will have the flexibility to invest across markets capitalization and style in selecting investment opportunities within this theme. Neelesh Surana and Vrijesh Kasera will manage this fund. In a press release, Swarup Mohanty, CEO, Mirae Asset Global Inves...

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...

Reliance Regular Savings Fund - Debt Option

Reliance Regular Savings Fund - Invest Online     The scheme aims to generate optimal returns consistent with moderate levels of risk. It will invest atleast 65 per cent of its assets in debt instruments with maturity of more than 1 year and the rest in money market instruments (including cash or call money and reverse repo) and debentures with maturity of less than 1 year. The exposure in government securities will generally not exceed 50 percent of the assets. The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year. The fund has been a consistent but not chart-topping performer in the income category. Despite its ...

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now