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Business insurance in a nutshell print Print

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When setting up a business you want it to stay running, whatever happens. Here's an overview of the different types of insurance you could consider for your business.

Having business insurance is one way to help ensure that you’re compensated for lost revenue if the unexpected were to happen.

But one size doesn’t fit all.

If you’re a consultancy services business, your focus might be on insuring against potential liability arising from the advice you give to clients. If you’re a manufacturing business you may need to think about insuring your plant and stock so you can continue to make your products. If you’re a tradie, you may want to insure not only your tools, but also your ability to earn by having income protection. The type and level of cover you need depends on your business.

There’s a whole range of options and it can be confusing – so here’s a summary of the major types of business insurance and what they’re designed for.

Types of busines insurance

Business asset insurance

Business asset insurance covers against the risk of accidental loss or damage to physical assets – for example your property or buildings, machinery, materials, stock, tools, fixtures and fittings, office equipment and other contents.

Business interruption insurance

If something happens to stop your business operating as normal – for example, a fire or a burglary – the consequences could be significant. Business interruption helps protect you by compensating you for things like staff wages and lost income while your business is unable to operate normally, or the extra costs in keeping it running (for example, if you need to bring in generators for power).

Business liability insurance

This covers legal costs and expenses for accidental injury to other people or damage to other people’s property. Depending on the type of business, there are many different types of liability you can protect against, including:

  • Public liability – if you or your staff cause accidental damage to someone else’s property. For example, if one of your employees accidentally damages someone else’s property while trimming trees.
  • Professional indemnity – if something goes wrong as a result of professional advice, services or designs you provide. For example,  if you design a product that breaches copyright. 
  • Statutory liability – if you unintentionally breach an Act of Parliament covered by the policy. For example, if you’re found to be in breach of the Fair Trading Act or Resource Management Act.
  • Employer’s liability – cover for accidents and illness to your employees that aren’t covered by ACC. For example, reparation costs you are required to make to an injured employee.

Business vehicles insurance

This type of insurance covers you against loss of, damage to, or damage caused by, your vehicles. This is important where vehicles are key to the smooth running of your business. For example, where they’re used to carry stock or tools.

Life/key person and disability insurance

This type of insurance protects against the impact of you or key staff members being unable to work. For example, it could cover the cost of employing replacement cover if you were unable to work due to illness or injury, or compensate the business for the loss of a staff member with critical business expertise or relationships if they suffered illness or injury.

Specialist insurance

Depending on the nature of your business, there’s also a range of options to cover specific risks. For example, if your business is highly dependent on machinery, there’s machinery breakdown insurance to ensure that if anything goes wrong, your machinery can be repaired or replaced, and your business can be back up and running, as soon as possible. Similarly, if you’re a property developer, you may want to consider taking out contract works insurance to protect against problems or issues during construction.

Assessing your needs

There’s no hard and fast rule about how much insurance cover you need for your business. Lenders, customers, or legislation may require you to have certain insurance cover but apart from that, it’s up to you. It really comes down to taking the time to carefully think through the risks your business faces, and assessing the impact on your business if any or all of them occurred. Insurance has a key role to play in mitigating those risks.

When taking out insurance cover, it’s also important to understand exactly what is not covered by the policy. It’s no use waiting until something goes wrong to find out what’s not covered – it’s important to read the fine print.

Managing your cover

While assessing your risks is ultimately your responsibility, a good insurance adviser can help you work through your needs, ask the right questions, and bring an independent viewpoint.

It’s also important not to simply ‘set and forget’ your cover. Your business changes over time, and so does your risk profile. That’s why it makes good business sense to review your insurance cover with your insurance company or adviser, at least annually, to assess whether (a) you’ve got the right level of cover in place, or (b) the business faces new or different challenges or risks.

More information

Part of setting up a business is making sure you’re protected against life’s unexpected curveballs. To find out more about the different types of insurance that may be right for your business needs, speak to one of our Business Specialists today. Or read our Expert tips for business insurance article.

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