No matter if you’re a butcher, a baker or designer dress maker, the reality is businesses face risks every day. From a fire at your business premises to stock being stolen, these risks can threaten your business, having a significant impact not only on your day to day operations but potentially your financial situation too.
Most business owners will work hard to minimise the threat of risks by taking preventative measures like installing fire sprinklers and carefully securing stock. Having Business Insurance to suit a business’ needs should also be an important risk management consideration.
Some of the things Business Insurance can provide protection for include business assets and the turnover of the business. Items that are typically covered include buildings, plant and machinery, tools and portable equipment and turnover when the business is unable to produce turnover due to an insurable incident.
Business Insurance provides protection* against insurable events such as fire, theft, flood, accidental damage and other perils outlined within the policy wording. It can also cover natural disasters such as earthquake depending on whether the cover is available in the location where the business assets are located.
Covers material damage to buildings (permanent structures and fixtures and fittings such as signage and security) caused by fire, flood and accidental damage. The coverage is often provided on a replacement value basis so that the building can be restored to its intended purpose and the business can continue with the replaced asset. Insurers will typically take into consideration matters such as the age, the building structure and the location in determining a policy premium level for the risk.
Covers material damage to the contents of a building or office including furniture, electronic equipment, tangible goods and machinery caused by fire, theft, flood and accidental damage. The policy often provides cover based on replacement value. Some machinery breakdown cover may also be available.
Covers material damage to stock caused by fire, flood, accidental damage and theft. Stock is either replaced by insurers or an allowance made for the stock already in trade in the event of a total loss. This may be of particular interest to retail or hospitality businesses.
The tools and equipment of most trades people are critical to continuing a business and earning revenue. Covered items might include laptops, electric saws, lawnmowers or painting equipment. These are usually covered anywhere in New Zealand for accidental damage, theft and fire.
Where a business has suffered a material damage loss, there can also be a loss of revenue as a result. This policy coverage is designed to meet the loss of insured revenue over an agreed indemnity period. This is often six to twelve months depending on the complexity of the business, the lost asset and how quickly the business can get back to usual productivity.
In addition to the lost revenue, the policy may cover reasonable expenses to set up an alternative workspace until the damaged asset is reinstated. Depending on the business, this might be relatively easy to do or not. For instance, an IT firm might be able set up somewhere else within days whereas a manufacturer might take a lot longer to find a suitable alternative.
Business Insurance policies do not provide indemnity for a business that has negligently caused third party property damage or for a business that has provided wrongful advice leading to a third party sustaining loss. These liability risks would be covered by Public Liability or Professional Indemnity policies.
Most business insurance policies will have an excess. This is the amount that the business is liable for when lodging and having a claim settled. It is usually a fixed dollar amount for material damage and a stand down period for the business interruption.
The matrix below is designed to link policy section covers to typical business risks/losses and explains a bit more about the covers.
|Loss Example||Policy Section||Cover Summary*||Excess Examples*|
|Theft of business stock||Business Insurance – Material Damage||Provides cover for loss of stock with intention of putting the business back in the position it was before the theft occurred.||$1,000|
|Business premises destroyed by fire||1) Business Insurance – Material Damage
2) Business Insurance – Business Interruption
|Provides cover for a rebuild or settlement so that alternative premises can be purchased (Material Damage). It also provides cover for the cost of cleaning up the site (Material Damage-Claims Preparation). The lost revenue can be claimed for an agreed period known as the Indemnity Period (Business Interruption – Loss of Revenue). The policy also provides cover for renting alternative premises/equipment during the rebuild so the business can continue (Business Interruption – Increased Cost of Working).||$2,000 for the asset and the first seven days for the loss of revenue / business interruption|
|Business Office suffers a deluge due to faulty sprinkler system||Business Insurance – Material Damage||Provides cover for damage of contents with intention of putting the business back in the position it was before the loss occurred.||$1,000|
|Tradesman’s tools are stolen off a jobsite||Business Insurance – Portable Equipment||Provides replacement of stolen tools so the insured can continue their trade work.||$500|
|Tradesman spills paint on jobsite which lands on the floorboards of the owner’s premises||Not Business Insurance but Public Liability Insurance||Public Liability Insurance provides cover for third party claims for damage and loss caused by the insured’s negligence whilst carrying out their work.||$500|
|Accountant gives wrong tax advice to client who now wants compensation||Not Business insurance but Professional Indemnity Insurance||Provides cover for professional negligence, including wrongful advice||$2,500|
* As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.