Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha

What are Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha?

Bharat Sookshma Udyam Suraksha (BSUS) and Bharat Laghu Udyam Suraksha (BLUS) are standard fire and allied perils policies for businesses, introduced by IRDAI with effect from 1 April 2021. They cover a firm's buildings, plant and machinery, furniture and stock against fire and named perils under a uniform wording that every general insurer writing fire business must offer.

The two policies are split by size. BSUS applies where the total value at risk across all asset classes at one location is up to ₹5 crore. BLUS applies where it is above ₹5 crore and up to ₹50 crore. Risks above ₹50 crore are written under the SFSP policy or insurers' own commercial wordings. The categories mirror the micro and small enterprise idea, but the test is value at risk at a location, not the MSME registration definition.

How the BSUS and BLUS policies work

Both policies include built-in covers such as additions and alterations, temporary removal of stock, start-up expenses, professional fees, removal of debris and costs required by municipal rules. Buildings, plant and furniture are insured on reinstatement value; raw material on landed cost; work in progress on input cost; finished goods on manufacturing cost. Inbuilt perils such as STFI and riot cover cannot be removed to cut premium.

If the value at risk moves above or below the band during the year, the policy continues to expiry and is then replaced with the correct product. Since June 2022, insurers can also file alternative products for these segments, using the standard wording as the reference.

How the 15 per cent waiver works

Under-insurance is measured at the time of loss. Under these policies, a shortfall of up to 15 per cent between the sum insured and the true value is ignored and the claim is paid without a proportionate cut. A larger shortfall brings the average clause into play, and the claim is reduced in the manner set out in the policy wording.

Example: a workshop's machinery is worth ₹1 crore and insured for ₹90 lakh. A fire causes ₹20 lakh of damage. The shortfall is 10 per cent, within the waiver, so the claim is assessed at ₹20 lakh less the excess. Had the machinery been insured for ₹60 lakh, the 40 per cent shortfall would be well outside the waiver and the claim would be cut.

What these standard MSME policies mean for distribution

• They are the core SME fire product. Most small business fire policies in India fall in these two bands, which makes them the main property product for bank and NBFC corporate agents, SME-focused brokers and digital MSME platforms.
• Standard wording shifts competition to service. With the same cover across insurers, distributors compete on claim support, speed of issuance and help with valuation. That favours partners with good survey networks and responsive claims desks.
• Valuation discipline still matters. The 15 per cent waiver is a cushion, not a licence to under-insure. Stock-heavy traders should be offered the declaration or floater options so that seasonal peaks are covered.
• Loan-linked sales carry conduct risk. Much of this business is placed when a working capital limit is sanctioned. The borrower's right to choose the insurer, and a clear explanation of premium and cover, protect both the lender and the insurer from mis-selling complaints.
• Cross-sell is natural. Burglary, money, fidelity, public liability, machinery breakdown and business interruption are all outside these policies. A package conversation at the fire sale or renewal raises protection and average premium per customer.