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

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
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