What is your business prepared for? Staff turnover––perhaps. Theft from your premises––almost certainly. A natural disaster? Probably not––and that can end up being a big problem.
Here in New Zealand, we are blessed with enormous natural beauty, but cursed with an equally enormous number of natural disasters. These can range from record-breaking earthquakes right through to flooding and tornadoes. Despite all this, many businesses make the mistake of not including business interruption cover in their insurance portfolio.
This is the biggest mistake you can make with your business insurance, but it certainly isn’t the only one. Read on to get informed about your risks and protection needs now.
If you don’t have business interruption cover, you are putting your business at serious risk. Not just from the direct effects of a natural disaster, which can be substantial, but from the indirect effects as well.
Consider your supply chain. Do you get resources from overseas? Perhaps you export to or from the South Island. You might even source all of your stock locally, or provide services only to those Kiwis in your vicinity. But an earthquake, a tornado, or even just simple high winds can make it difficult or outright impossible for you to provide your services, products, or receive the services and/or products you need to continue operation.
That costs your enterprise money––sometimes a lot, and for a long time. Disasters can take weeks, months or even years to resolve (such as the Canterbury earthquakes). Not having the insurance policies to cover the major issues is bad enough, but even a downed power line could put you out of business for a day.
Don’t make this common mistake and wait until a disaster happens to get insurance: be proactive.
Having business interruption insurance is important––but equally important is having the right kind of interruption insurance.
All too often, people simply get the cheapest or most basic policy they can, enjoying the illusion of protection that it gives them. But when they actually need to claim, they find that it is full of exclusions and amendments that make it ill-suited for their unique business risks.
All too often, people simply get the cheapest or most basic policy they can, enjoying the illusion of protection that it gives them.
An example of this might be a business that frequently uses seasonal stock in its operations. Something occurs to interrupt their operations, and the seasonal stock expires. They can now no longer provide their products and/or services––and their insurance policy doesn’t cover seasonal stock. They are stuck with swallowing the loss and, quite likely, needing to upgrade or update their insurance so it doesn’t happen next time.
This is why we always recommend you speak with a trusted advisor before buying any kind of insurance policy. In the case of business interruption policies, this is all the more important to ensure that you have the inclusions that your business needs.
Finally, there’s the need to keep insurance up to date. Businesses, particularly small businesses, can rapidly grow from year to year. A company worth a few thousand dollars one year could easily grow to tens or hundreds of thousands by the end of the next.
That means any interruption to your operation is going to be more expensive, and your insurance policies need to reflect that. Your limits, in particular. If you suddenly lost a significant amount of stock, or your services went down due to a natural disaster, you will need more funding to replace your operational fees than you did last year.
Check your policies at least once a year, though six months might be even better for businesses in high-growth scenarios. Update your business interruption insurance to take the new value of your operations and its stock into account. This will keep you from a nasty surprise the next time your network goes down or your business needs to close for a period.
Get the right cover with the right inclusions and update it at least every year. Failing to do this can result in serious problems for your business should a disaster occur, so don’t make the biggest mistake of all: get the protection you need now, rather than waiting for the worst to happen.
Think you need more information on your business insurance needs? Download our free business insurance ebook below to take another step down the path towards true risk assurance.