There is no hard and fast rule about how much cover is needed, says Chris Ryan, chief executive of the Insurance Council of New Zealand.
The events of the past year have given many New Zealand businesses good reason to look at their insurance coverage.
So many Christchurch companies found that they had the wrong insurance cover for their needs.
What sorts of business insurance should small to medium enterprises look at taking out?
There are many different kinds of business insurance a SME can consider purchasing.
You should talk to your insurance adviser or broker before deciding exactly what policy will be of most benefit to your business. However, the following types of cover are among the options SMEs could consider.
* Loss of insured profit.
* Loss of rent.
* Loss of revenue.
* Wages and wages in lieu of notice.
* Redundancy pay.
* Claims preparation costs.
* Book debts.
* Rewriting of records.
* Additional increased costs of working.
Some business interruption polices may automatically include insurance cover for eventualities such as:
* Prevention of access to your business as a result of property damage.
* Danger to human life, or injury to any person, or murder or suicide of any person.
* Closure of your business by any authority, for example, for defects in drains or the escape of fumes or hazardous materials.
Why should I take out business interruption insurance for my business?
Business interruption insurance covers the continued operation expenses, profits/losses that would have been earned had there been no interruption.
If you're a small business operator there are several good reasons to consider taking this out.
For a start, you never know when a disaster will strike that can effectively put you out of business.
With the right business interruption cover you can be back on your feet trading as soon as possible giving your business a competitive advantage over those not insured.
Business interruption insurance also helps pay your employees during the time your business is unable to operate and it also helps you while you rebuild or repair your damaged business premises.
Business interruption insurance is probably the most valuable coverage your business can have.
It is also coverage that is frequently overlooked by businesses.
This is because it is easy to forget that income cannot be produced without an operating business or the business owner mistakenly believes that property insurance will cover all losses.
Property insurance covers only the physical loss or damage to the location and contents of a business - it does not cover the loss of income or the continual fixed costs while the location is being repaired. A business interruption policy can also cover operating expenses, or fixed costs, still being incurred like electricity, rent and staff wages which continue even though your business activities have come to a temporary halt.
Some business interruption polices also cover the extra expenses of moving to and operating from another temporary location while your business premises are under repair/rebuild.
Others will cover extra expenses such as reimbursement for reasonable expenses (beyond the fixed costs) that allow your business to continue operation if this is possible while your business is under repair.
How do I determine how much business insurance cover I need to protect my business?
There is no hard and fast rule about the amount of cover you will need.
Most insurers will be able to provide you with a simple worksheet that enables you to tick the various boxes to assess your individual business insurance cover needs.
Completing the worksheet with your accountant or insurance broker will generally ensure that you are purchasing the right amount of coverage to suit your business.
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