To account for disruptions in their usual functioning, businesses safeguard themselves by purchasing insurances that mitigate such risks. These are usually covered through an ‘all risk policy’, a ‘business package policy’, or a ‘standard fire and special perils policy’, which generally cover loss of profit due to a business interruption.
In India, business interruption insurance is not sold on a standalone basis and is covered as a part of the aforementioned policies. COVID-19 and the resultant national lockdown which has been in effect since March 25, 2020 has brought regular functioning of businesses throughout the country to a standstill.
In these times, it is important for companies to understand the coverage provided under such insurance policies and if there is a ground to make a claim.
What is covered and what is not?
Generally, the wording of these polices limit the coverage only to loss of profit for a period during which business is interrupted or otherwise disrupted due to material damage to the property/asset. In other words, no claim can be made for a loss of profits due to business interruption, without there first being material damage to assets/property insured under such policies. As such, physical loss or damage is a precursor for a claim of business interruption.
Lockdown as a cause for business interruption
Even if one were to look past the requirement of physical damage, policies generally have a specific exclusion for any loss or damage caused as a result of an order of a government authority which results in the policyholder being prevented from accessing the property. This would further vitiate the chances of making a claim given that the business interruption has been due to the lockdown imposed by a government order.
Few policyholders opt for optional add-on features that cover loss incurred due to hindrance or prevention of use of premises as a result of a government or police action. Policyholders with such add-on features should be able to make a viable claim under their insurance policy.
However, it is to be seen how the insurers handle such claims. Also, the exact language in the policy would play a key role in determining the viability of the claim.It would be prudent for businesses who have taken such business interruption policies to look into the fine print to see if they are covered for disruptions on account of COVID-19.Regulatory assistance
The insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI) has emphasised the need for insurers to be sensitive to the needs of the policyholders in light of COVID-19.
Most insurers have taken a position that any business interruption due to COVID-19 is excluded from the policy as the coverage is only for material damage (and, also that the premium charged didn’t factor a disruption on account of a pandemic/lockdown). This view has also been backed by the General Insurance Council (self-regulatory body for all general insurers) (GI Council). This has led to some backlash from businesses that were hoping for insurers to take a more lenient and case by case approach. The Insurance Brokers Association of India has even written to the IRDAI to intervene in this unilateral decision taken by insurers.
What must be noted here is that the government has a monopoly in the re-insurance market and controls three large general insurers. It needs to be seen how it balances these interests while providing any relief to businesses.
A common condition in these policies is the requirement to take approval from insurers in case of non-occupation of the premises for over 30 days. In a relief to businesses, the GI Council has decided to give a one-time relaxation to policyholders from this condition for the period from March 25 till May 3, 2020. The IRDAI has also endorsed this move.
In other economies, such as the USA, several business owners have filed claims under business interruption policies and have seen these being rejected by insurers. These business owners are now coming together to file class action claims against insurers, with one of the grounds being that viral infections are not specified as exclusions under the policies.
There is speculation that the government might intervene and provide some relief. While the insurance policies in USA are surely different from that in India, what happens there, could very well have a ripple effect here.
Road ahead
Historically, businesses in India have been reactionary rather than precautionary when it comes to procuring insurance. For example, estimates of the insurance coverage to total losses suffered in the 2018 floods of Kerala ranges between three percent and five percent. In comparison, in USA the insurance coverage was about 64 percent for natural catastrophe losses in 2018.
COVID-19 and the nationwide lockdown are unprecedented situations for both insurers and businesses. However, these unprecedented situations have also further highlighted the virtue of being adequately insured.
From the perspective of insurers, it is an opportunity to roll out a new array of products and add-on features that protect businesses from such risks, albeit with high premiums and exclusions.
Also ReadCoronavirus: How workplaces will reboot in the post-COVID-19 era
For businesses, we will see a tectonic shift in approach towards insurance and seeing it as valuable investment for mitigation of risk. In the short to mid-term, a number of litigations around interpretation of business interruption provisions in policies seems inevitable.
(Edited by Javed Gaihlot)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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Original Source: yourstory.com
It may sound counterintuitive, but managing your money gets easier the more you have. When you cross a certain income threshold, you can afford to pay a wealth management company to sweat the details. All you have to do is sit back and watch your money multiply.
For a broke college student, money management is a bit more hands-on. It’s important to start building a base of financial knowledge in early adulthood, but the resources at your disposal are limited. Unless you have wealthy parents bankrolling your expenses, you need to find free or cheap ways to start gaining financial literacy.
Thankfully, most universities are brimming with free financial resources for students – all you need to know is where to look. Here are a few options to get you started.
Take Personal Finance Classes
As a senior in college, I took a basic personal finance class offered through the business school. As the daughter of a CPA, I’d always had a passing interest in money management. The course taught me fundamentals like how to budget and how insurance works.
It was a helpful primer for life after college. Learning about what a deductible is and how 401(k)s work prepared me for my first post-grad job, giving me the tools to get the most out of my benefits package and entry-level income.
Many colleges offer introductory personal finance classes within the business school or finance department. Unlike other business-related courses, these classes are often open to non-business majors and usually don’t have any prerequisites.
These courses generally won’t count toward your major so consider it a fun elective to take if you have a free spot in your schedule. Some colleges only have one basic personal finance class, while others have several designed to be taken together.
These classes go through concepts like budgeting, debt management, insurance, taxes and investing. If you have questions about more complicated topics, you can reach out to the professor during office hours. Even after graduating, I would still email my personal finance professor with specific questions.
If you’re already taking the maximum amount of credit hours, you can still take advantage of a college personal finance class. Whitney Hansen, Host of The Money Nerds Podcast, is an Adjunct Professor at Boise State where she teaches personal finance. She said students who are busy or don’t have any credit hours can audit a personal finance course instead of enrolling.
Auditing means the course won’t show up on their transcript or use up any credit hours. They also don’t have to worry about attendance or the grade affecting their GPA. Hansen said she always sets aside seats for students who are interested but can’t add another class to their official schedule.
Find Personalized Help
Some colleges offer specific workshops or employ dedicated counselors to provide financial advice to current students. As more and more people push for an increased emphasis on financial literacy in higher education, these options are becoming more readily available every year.
For now, the problem is knowing where to look. If you’re a freshman or go to a large school, finding these programs can be particularly difficult.
“A lot of universities have their financial resources spread out in a few places,” Hansen said. “The best places to look are on your school’s financial aid office website, student affairs department, admissions office, and talking with your academic advisor.”
If you can’t find any personal finance workshops, you can request that the college add one to the docket. Colleges often have a special discretionary budget for student events, and anything directly aimed at promoting post-graduation financial success will be an easy sell.
“Depending on which school you attend, you may also be able to find free personal finance programs or workshops offered through student life/affairs, or as one of the spokes of your school’s overarching wellness program,” said Tara Falcone, CFA, CFP®, Founder of ReisUP and creator of online financial literacy program, LIT. “Finally, you may have the opportunity to attend free personal finance workshops led by alumni who are passionate about financial literacy.”
Go to the Library
If you’ve already got your classes scheduled or your college doesn’t offer financial workshops year-round, you’ll have to take your financial education into your own hands. Start by checking out beginner personal finance books at the college library.
All of these books will be in the same nonfiction section, usually near business and marketing books. College libraries often have longer loan periods than public libraries, so you should have plenty of time to get through whatever you choose to check out.
If you’re having trouble finding a specific personal-finance book, you can request that the college library purchase it. You’ll probably have to talk to a librarian and fill out a request form. You could also visit the local public library and see if they have a more varied selection.
One age-appropriate selection for college students is Erin Lowry’s “Broke Millennial: Stop Scraping by and Get Your Financial Life Together.”
Lowry, also a Mint contributor, answers elementary questions like, “What kind of bank account should I open?” and “What is an emergency fund?” Her book is easy-to-read and designed for those with no prior personal finance knowledge.
Contact Your Bank
Your bank wants you to be financially successful. The more capital you earn, the more you can save, invest and borrow in the future. Because of this, your bank has a vested interest in helping you learn about personal finance.
Many banks offer personal finance workshops to customers looking for a better understanding of their finances. These events cover topics like creating a budget, paying off debt and buying a house.
If your bank has a local branch, see if they have any workshops scheduled. Visit your bank’s website or call the branch directly. They may have in-person sessions, virtual classes or webinars. You can also ask if they have financial counselors or educators who offer one-on-one support.
Sometimes you can request the bank to facilitate a workshop for a group, like a club or sorority you’re part of.
If your bank doesn’t have a physical location near you, see if there’s a credit union attached to your school. This is common with major universities, and these credit unions may have special programming designed for college students. You may have to join the credit union to attend a workshop, but they’re often open to the general public.
The post Where to Find Free Financial Resources in College appeared first on MintLife Blog.
Original Source: blog.mint.com