Whether you’re a sole trader with one employee (you) or run a construction site with a 20 employees, getting the right insurance cover is crucial for every small business. You never know when things might go wrong, so it’s better to be safe than sorry.
So where do I start?
Business insurance doesn’t have to be confusing and difficult. Business Insurance Finder™ offers tools and guides to explain how it works and help you save money on cover.
Accidents can happen and any business runs the risk of losing its reputation, cash flow and ability to survive if disaster strikes. On top of all that, you could even have to dig into your own personal finances.
Let’s say you’re a plumber and you incorrectly fix a pipe for a restaurant which forces it to stop operating for a month. You could be forced to pay out what the restaurant would have earned in that time – all because of a genuine mistake.
This is why business insurance exists. It’s protection for a range of things like getting sued and much more.
Types of risks businesses could face
You’re a retail owner and someone slips on your premise.
Damaging someone’s property
You own a car wash and one of your employees spills chemical into a car’s interior.
Getting sued for a faulty product
You accidentally sell fruit which is contaminated and your customers get sick.
Giving incorrect advice or service
You’re an architect and you provide a client with a flawed design that needs to be fixed after the building has already been built.
Financial penalties for mismanagement
You could be penalised for breaching occupational health and safety regulations.
Business-specific accidents and damages
Some businesses will need to cover against theft, while others will be concerned about natural disasters like fire.
Make sure you cross these off your list. We’ve made a table to help you determine which of the three main types of business insurance you may need:
If your business…
You run the risk of…
Insurance can help with…
Product liability insurance
Designs, produces or manufactures a physical product (eg, assembly, design firm or takeaway food)
Supplies or installs a physical product (eg, electrician, online distributor or retailer)
Your product causing damage or loss to people or property
Your product failing to fulfil a promise or responsibility
Claims of faulty installation
Court & legal fees
Compensation & damages costs
Public liability insurance
Has publicly accessible premises (eg, supermarket, dentist or restaurant)
Performs services in public spaces (eg, road workers, personal trainers or event organizers)
People injuring themselves on your premises
Property being damaged or stolen
Claims of negligence or dereliction of duty leading to financial loss
Court & legal fees
Property damage and loss costs
First aid expenses
Professional indemnity insurance
Gives advice (eg, consulting or medical)
Provides a service (eg, building surveyor or IT professional)
Claims of incorrect, misleading or damaging advice
Accusations of poor or fraudulent service
Court & legal fees
Public relations fees to protect your reputation
Cost of investigation into the claim
Compensation & damages costs
Cyber liability insurance
Businesses that rely on digital data
Court & legal fees
Lost business revenue
Public relations fees
The cost of theft
Team of managers
Employee claims for wrongful dismissal
Financial penalties for occupational health and safety breaches
Financial penalties for directors breaching their duties
Court & legal fees
Public relations fees
Site being damaged by natural disasters or other causes
Employees being injured on site
Physical loss, destruction or damage to the property
Legal liability for third-party injury or property damage
Transit of construction materials
In addition to the basic insurance detailed above, there are a number of options available to deal with your specific needs.
These are covered in much greater detail further down, but here are a few examples:
Fire and theft cover. If your business is especially susceptible to loss by theft or fire, such as a private theatre or a retail outlet, this can help cover the costs of restoring the building and replacing whatever was damaged or stolen.
Management liability. This can protect you from claims arising from your alleged mismanagement of the company, rather than any direct fault of a product or service. These claims often affect your personal wealth as well as that of the business.
Construction insurance. This is public liability specifically for situations where you’re building, renovating or extending a home and covers on-site accidents, vandalism and damage from natural disasters.
Cyber liability insurance. Cyber risk is a rapidly increasing problem for businesses. If you have any digital assets, such as online finances or confidential data, or you use digital devices heavily for your business, this can help.
While many forms of business insurance are optional for companies, you may be required by law to hold specific insurance policies. The following insurance is compulsory:
Workers compensation. If you’re working in New Zealand and you have employees, you must have workers compensation insurance.
The following may be compulsory, depending on your business and where it’s operating:
Public liability (PL) insurance. While most states require business owners to have PL before they can provide services, certain states have more stringent requirements. For example, electricians in Queensland, plumbers in Victoria and film makers in the ACT are required to have millions of dollars of PL cover before operating.
Professional indemnity insurance. Whether this is compulsory varies widely for different professions across New Zealand.
Some risks such as an economic recession where demand for your product or services may fall or a close competitor infiltrates your market are not covered by business insurance but other risks can be.
How much will business insurance actually cost?
Factors that affect cost
Like most insurance quotes, it depends on circumstance. The amount you pay for cover depends on what type of business you’re running, how many people you employ and what sort of extra risks you run. Chances are if you’re running a light team of four or five librarians, your insurance will cost less than if you have fifty architects planning homes across the country.
What can I do to reduce how much I pay for cover?
The following are some key steps you can take to avoid overpaying for cover you don’t actually need:
Increase your excess. Like most insurance policies, raising what you pay in case of a claim can drive down your ongoing premium costs.
Bundle up. Taking out all your policies with a single company can net you a handy discount.
Skip useless extras. If you don’t need it, don’t pay for it! An insurance broker can help you figure out what’s likely to matter for your business and skip the rest.
Is business insurance worth it? Consider the following scenarios
You’ve worked hard to get where you are. Maybe you built your business from the ground up or you’ve taken it and turned it into something to be proud of. So why risk it? No matter how careful you are, accidents happen, mistakes get made and people file complaints out of anger or spite. Without insurance, one bad situation can put you out of business for good.
What would you do if someone got really sick or a worker was injured on your site? How would you cope if a flood ruined your building or a thief made off with thousands of dollars of stock or private data? These are important questions you’ll need to answer.
Here are a few situations where business insurance just might save you:
You’re running a small medical practice
A patient who sought advice from one of your doctors concerning a medical procedure files a legal complaint against you when the procedure goes poorly. Even though the doctor’s advice was sound and the procedure was botched by someone else, you’d still have to pay thousands of dollars in legal fees to settle it, which insurance would cover.
You own a restaurant
In the course of an evening, one of your waiters trips and spills boiling hot soup on a customer. Business insurance can help you with recompense for the injured person and cover any possible legal fees that you otherwise could face.
You’re the owner of a retail outlet that sells expensive jewellery
Despite the extensive security measures you’ve wisely invested in, a thief manages to break in and get away with thousands of dollars of stock. Without business insurance, you’d either have to accept the loss of whatever unique and pricey pieces the thief got away with or pay to replace it out of your own pocket.
How do I find the best business insurance
When shopping around for insurance, you need to know what you want in order to get the best deal. Here are some simple checks to consider when browsing:
1. Figure out your business risks
Every business is different. Depending on how your business works, you’ll naturally have different risks. Determine the most likely issues to come up and which would be most damaging without insurance. If you have employees, what would happen if they were dishonest or got injured? Do you have a product or service people might be unhappy with? How vulnerable are you to theft or disasters?
2. Compare policies that cover your risk
Once you’ve figured out the risks, you can pick a policy. You might need one of the three main kinds of business insurance or some combination of them. Figure out what special circumstances apply to your business. Are you building homes or moving merchandise? This determines which extras you may need.
3. Picked a policy? Now look at what you are covered for exactly
Ensure you understand the policy you’re taking out. Are you covered for the worst situations? Is your insurance limit high enough to cover your most valuable assets if they get damaged or stolen?
4. Check what’s not covered
This is almost more important than what you are covered for. Every insurer places caveats on claims. These are situations and circumstances where they won’t acknowledge a claim. Investigate these carefully before taking out a policy. We’ve listed some of the most common in the “Exceptions” section below.
5. Consider an insurance broker
Using an insurance broker to choose the best policy for you can save you money overall. Finding the perfect policy can take a long time and can cause a ton of stress. Even after all this, you might end up with an inadequate or an over-the-top policy. Insurance brokers can walk you through the process, assess the biggest risks your business is likely to face and choose the best policy for you.
Small business insurance
Run a small business? Here’s why cover is essential
If you run a small business, you likely don’t have to worry about many of the same problems that a much larger business would face. But this doesn’t mean that you’re home free. Small businesses have a number of unique risks that a larger company doesn’t.
These can include the following:
Small customer pool. How many customers make up the bulk of your business? If one of your regular customers stopped using your services for any length of time, it could lead to a catastrophic drop in revenue.
Few suppliers. How many suppliers do you generally rely upon? If one of your suppliers stopped supplying you, it could severely slow down business or bring it to a grinding halt.
Employee issues. These are wide-ranging and can include staff seeing your business as temporary employment on their way to another job, leading to high turnover rates. You may have a few employees who are crucial to your business leave and throw things into chaos. It’s even possible that employees who are necessarily given a lot of freedom in running important parts of your business abuse your trust and commit fraud.
Limited premises. Small businesses are frequently tied to one location that is vital for their operation. What would happen if a storm or fire heavily damaged the premises or the business outgrew the location? This could cause dangerous and expensive disruptions.
Reputation. Many small businesses live and die by their reputation in a community or industry. How would you cope if your company were accused of fraud or dishonesty?
Cyber risk. Disruptions to power, Internet access or machine function can completely shut down a business’s trading capability. A virus ruining your computers or a power outage can have very expensive consequences.
Small financial overhead. If you trade on credit, it’s possible you may be called to account. What would you do in that situation? What if competitors were to appear in your market and disrupt your finances with similar services and lower prices?
Frequently asked questions
Does business insurance cover loss of income?
Under business interruption insurance, a business will be covered for loss of revenue that it suffers following an unforeseen event. This means that while the business is being repaired, cash will be provided to account for the loss of revenue but not for personal income.
This typically includes the following:
Profits that would have been earned based on the previous financial statements
Rent of a temporary location while repairs are being made. This may include advertising costs to let customers know the new location
Staff wages while the business is temporarily closed
Additional expenses that ensure the business is able to continue to operate while repairs are made
Fixed costs that still have to be covered on previous property that is under repair
The benefit will be paid until the end of the business interruption period, which is determined at the time of application. This is known as the indemnity period.
This will differ from business to business, so you will need to take the time to assess the risks that face your business and how long they could take to recover from. As an example, insurer CGU reportedly had a customer that was only able to recommence operating after a period of 18 months after the business was consumed by a fire.
Still not sure? Some final questions you might have
Your insurance provider will have supplied a number and instructions about how to make a claim. In most cases, you will need to supply proof of ownership or legal responsibility and as many details as you can about your claim.
Have cover in place but not sure if there may be something more suitable out there? Here are some steps to review existing cover:
Assess how your business has changed in the last 12 months. Has your number of staff grown or decreased? Have you obtained new assets?
Cut cover you don’t need. Do you have cover in place that is no longer relevant to the risks your business has? Can these be trimmed back?
Add cover for any new risks your business is now facing. Do you face new risk events that could cause a loss of revenue?
Business insurance can be complex. There is a wealth of business insurance policies available on the market, each of which has been designed to meet a specific need. Determining the right type and level of cover for your business can be quite a difficult task, so it pays to have help.
Brokers are experts. Business insurance brokers have a wealth of experience and an in-depth understanding of the business insurance market. They know which policies are available and which ones will be right for you.
Brokers work for you. Just like your accountant works in your best financial interests, it’s the job of a broker to do everything they can to get you a suitable insurance deal.
Brokers know your business. A good business insurance broker will take the time to understand the ins and outs of your business. This will give them the information they need to formulate a reliable insurance strategy that matches all your needs.
Brokers know the market. A business insurance broker knows exactly what policies are available on the New Zealand market. They can hook you up with policies and insurers that you may be unaware of if you were simply trying to arrange cover yourself.
There are specialist brokers available. You may be able to find an insurance broker who specialises in finding cover for businesses in your industry. This ensures that they will have an even greater knowledge and understanding of the risks facing your company
Like any insurance policy, it’s equally important to know when you won’t be covered. You can avoid losing out by checking the exact details of your policy, but there are a few that most policies won’t cover. You’ll probably lose out if your claim involves the following:
War, rebellion or insurrection
Government-approved confiscation, requisition or destruction of your property
A company you acquired after taking out business insurance or any assets related to that company
Unoccupied buildings or premises
Damage to buildings by lightning, earthquakes or impact by road vehicles or falling buildings
An electronic device or software that isn’t Electronic Date Compliant
Aggravated or punitive damages or fines
Obsolete equipment that is no longer used in the business
Great! You're one step closer to protecting your business
A broker will be in contact soon.
Have you thought about business bank account?
Now you've looked at insuring your business, make sure your making the most of your businesses cash assets with a business bank account.
Will is a personal finance writer for finder specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.
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