As a business owner it’s your job to ensure that your business can keep running and generating profit, even when unexpected events and circumstances get in the way of normal operations.
Insurance that truly caters to your business’s individual needs
The only way to achieve this security and peace of mind is by taking out business insurance that truly caters to your business’s individual needs. Regardless of the size of your business and the industry you operate within; business insurance is an expense that cannot be circumvented, both from a financial perspective and, in many cases, due to the many legal and operational requirements governing certain industries. There are essentially three types of business insurance policies that one can take out and, each of these is designed to protect your business in a very different way – but as we will clearly see, each type is equally important as the other. It is important to critically and accurately analyze and identify you're business’s particular insurance needs and take out an appropriate mixture of insurance policies to adequately meet these needs.
The most common and, in the majority of cases, most crucial type of business insurance is business asset insurance which essentially covers any physical property that your business may own. Many people are confused by the term “asset” because it has a broad definition that can be easily be misinterpreted by people that do not work in the insurance industry or that have very little experience with insurance. For all intents and purposes a “business asset” can be broadly defined as any physical property that your business owns that can be expected to be utilized in the business for a period of 12 months or more. This being said, stock and materials are also considered by many insurance companies to be assets – which is why it’s so important for you to review your insurance policy closely before signing up. For example, small to medium sized businesses that manufacture or produce goods will be reliant on their machinery which are very expensive, to continue production timorously. If this machinery happened to be damaged or stolen, the majority of business owners would not have enough savings available replace or repair this equipment and this could spell disaster for any business. Unless you are able to quickly get back up and running without experiencing major shifts in cash flow availability – you stand to lose your business and even your own personal savings and assets. Business asset insurance policies should cover all your large assets like property, equipment and vehicles as these would be the most expensive to repair or replace should they be stolen or damaged. Generally you would have to take out a separate insurance policy to cover your property and another policy to cover your vehicles however; some policies may combine these three into one comprehensive policy which may work out to be cheaper in many cases. We can all appreciate the reason that we need to ensure our properties (fire, explosions, water damage, vandalism, etc) as well as why we need to ensure our vehicles and business equipment but there are other “assets” that many business owners tend to overlook. Such assets include furniture, electronics, signage and fixtures, keys and locks should also be covered by your business asset insurance policy depending on the size of your business, value of existing assets and profitability. Someone that owns a single candy-floss machine out of their home may not need business assets insurance as much as someone that owns and operates a large candy producing business that owns several types of machinery. Likewise a large law firm may not own as many physical assets as a large printing company and will have very different insurance needs. It is always important to take a close look at what equipment and machinery repair and replacements your business can cover comfortably and which it cannot however, bear in mind that there are many event and circumstances which you are simply unable to consider – and therefore unable to prepare for. This essentially means your business asset insurance should be as comprehensive as possible so it’s best not to exclude any asset when taking out a policy. It is critical that you immediately update your insurance policy should you purchase new assets after taking out your initial policy – you’ll be surprised at how many business owners forget to do this and regret it deeply when their claim is rejected because these new assets were not included in the original policy. In addition to physical assets, there are certain businesses which require intangible assets such as intellectually property, patents, data and copyrights to be insured. These are very difficult to ensure and very difficult to recover – but are for many a crucial part of their business and cannot be ignored. Should you require any intangible assets to be insured it is important that you fully discuss it with your insurance provider to ensure that they offer cover for these things as well as consider how, if at all possible they will be recovered. Some insurance providers also do not include any electronic data or software in their business asset insurance policies – but this should be clearly indicated in your policy terms and conditions, generally under the “general exclusions” section. You should also be aware of any other limitations in the cover which can include loss or damage incurred outside of New Zealand, war, terrorism or confiscation by legal authorities, among a few others. Should you identify any exclusions that you’re unsure or unhappy about; you should speak to a representative who, in most cases will be willing to work with you to tailor a package to meet your specific requirements and requests. Should they be unwilling to do so you should approach another insurance provider immediately so that you can compare their offerings and make a more informed decision. It is however good business practice to request quotations from a variety of providers so that you can ensure that you're receiving the best possible deal, both in terms of coverage and cost.
Business interruption insurance
The second type of business insurance is known as “business interruption insurance” and essentially protects your business from any unexpected interruption in normal business operations. This form of insurance will cover you financially during the period that you are, for whatever reason, unable to operate as normal. This may include paying you out for any lost profit and covering essential expenses such as staff wages. For example, if you own a laser-cutting business and have experienced a break-in where your equipment was stolen, the business asset insurance will cover the cost of replacing the stolen equipment, while the business interruption insurance will pay out lost earnings for as long as it takes to have the equipment replaced. There are also specific extensions that may apply which will allow you to benefit from financial payouts under other circumstances that have nothing to do with physical damage or theft. For example, in the event that a key supplier becomes for whatever reason, unable to continue supplying to your business which results in either partially or completely affected income - you may be entitled to corresponding compensation for profits lost. Many businesses that have their normal operations interrupted and usual cash-flow affected, enter a period of despair which can in many instances cause bankruptcy and closure. To ensure you protect your business against such an enormous risk – it’s advisable to add business interruption insurance to your main business asset insurance as was mentioned above. When making a claim to your business interruption insurance policy provider your current and historical financial will be reviewed and profit projections calculated by a loan adjuster who will then recommend a settlement amount.
Business liability insurance
The last major type of insurance we’re going to discuss here is business liability insurance which, unlike the two previously mentioned types of insurance covers any legal charges and claims that may be filed against your business. This form of insurance should cover legal costs incurred by your business in the process of investigating and defending against a claim as well as any court judgments or out of court settlements. The three areas that are separately covered include broadform liability which will allow you to cover any claims made as a result of unintentional or, accidental personal injury to an individual or their property. If for example a customer slips while inside your business premises and as a result sustains any serious injury – your policy will ensure the claim cost is dealt with completely. Statutory liability will cover the costs of any governmental or authoritative fines or penalties incurred as a result of unintentional or accidental breech of any laws or regulations. This is particularly important for business operating in industries that are heavily regulated with complex and regulations as well as those that are prone to penalties and fines as a result of the nature of their business. In addition, a business should also take out an employer’s liability policy that can protect them from any personal injury claim made by an employee. Your employer’s liability insurance should cover personal injury claims made by both full time and part time employees – regardless of the total number of employees you may have.