The role of small and medium enterprises (SMEs) in the economy of Nigeria cannot be underestimated. According to the Nigeria Bureau of Statistics (NBS), local SMEs contributed about 48% of the national GDP in the last five years.
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There is an estimate of 17.4 million SMEs in Nigeria and they account for about 50% of industrial jobs and nearly 90% of the manufacturing sector, by several enterprises. With these statistics, SMEs ought to be given premium attention and support by both public and private stakeholders in the Nigerian economy.
Countries like India, China, the EU and the US, have used SMEs in growing and developing their industries. In the case of Nigeria, 7 in 10 SMEs do not survive the first three years of their establishment due to various factors beyond their control. The only way they can survive or reduce damages is through insurance.
As a small and medium-sized enterprise, the question of insurance plans cannot be negotiated. You might think that it is only big corporations that insure their businesses. This is not true in any way.
As an SME, don’t jeopardize your business by not insuring it. It is very risky not to get insured. The issue with SME insurance is that of the idea of cost instead of understanding loss. SMEs that don’t insure their business will themselves be blamed in times of crisis.
You might ask, what is insurance? According to Wikipedia, Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity that provides insurance is known as an insurer, an insurance company, an insurance carrier or an underwriter.
One might also ask – how does insurance work? Insurance works by bringing together the resources of a large number of people who have similar risks to make sure that the few people who experience loss are protected. So when you pay for insurance, you are contributing to a pool of resources, and when you experience hazards in your business, your insurer will take from that pool of resources and ensure your business.
If your property is accidentally lost, stolen, damaged or destroyed, and you have a general insurance policy that covers the property for those risks, you can make a claim and draw on that pool of money to help pay for repairs or replacements costs. This may enable you to avoid paying the full cost of replacing, repairing, rebuilding or restoring valuable things if they are lost, stolen, damaged or destroyed. It also means you could avoid ending up with a large debt or liability. In this article, we shall examine the best insurance plan for SMEs in Nigeria.
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Fire And Risk Insurance Plan
If you are an SME, Fire and Risk Insurance is pivotal for you. This helps cover your business against fire outbreaks, floods, social unrest, natural disasters like earthquakes and other intentional damages that occur in the course of running your business. When you experience a fire disaster, for instance, all you need to do is to get your insurer involved and you can get capital to start up your business again.
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Product Liability Insurance Plan
This type of insurance plan protects you anytime there is a problem with your product. For instance, in the cause of manufacturing a product and an accident occurs, which damages the product, you can meet your insurance company and get them to help you get covered. This is very important for every SME that is in the manufacturing line.
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Business Interruption Insurance Plan
There can be cases where business operation can be interrupted by several issues such as demolition of business building, for example, factory, by the government, workers’ strike, arson, burglary, and so on. The consequence of this interruption is that the business will lose a lot of money during those periods of interruption. Therefore, this plan can grant you recovery funds. For example, during the #EndSARS protest, businesses that were affected by the destruction caused by protesters will receive insurance cover if they have their business insured.
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Professional Liability Insurance Plan
This plan protects you anytime your business is faced with legal actions from clients. It protects your business against laxity caused by your business. Mistakes or failures might emanate from your laxity or that of your coworkers. For example, if you are into pharmaceuticals and you mistakenly diagnosed a disease wrongly and gave the wrong dosage which led to danger to your clients, and you are sued for it, your insurance company can step in to cover you.
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Commercial Property Insurance Plan
This type of insurance plan covers all business equipment, signage, inventory, and furniture in the event of a fire outbreak, or during a crisis. However, this plan is dependent on the contract you sign with your insurance company. Ensure you study the standard policy of the insurance company.
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Goods-In-Transit Insurance Plan
This plan is ideal for SMEs that engage in hauling goods from one city to the next. Due to unforeseen circumstances where goods might get damaged due to the poor state of Nigerian roads, or goods could go missing as a result of robbery and theft, this insurance plan can help you get covered. In a case where goods are destroyed or stolen on transit, you will not lose your money’s worth as well. The plan protects your goods against fire, theft, or accidental damage while the goods are being loaded or unloaded or whilst temporarily housed within the general course of transit.
Featured Image Source: Businessday NG
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This article was first published on 25th January 2022
nnaemeka-emmanuel
Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.
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