Business Interruption Insurance NZ Explained

Business interruption insurance in New Zealand is designed to help businesses recover from unexpected events that force them to close temporarily.

It's a type of insurance that can provide financial support to businesses affected by disruptions such as natural disasters, power outages, or even cyber attacks.

To be eligible for business interruption insurance, a business must have a valid business interruption policy in place before the disruption occurs.

Businesses can choose to purchase a standalone business interruption policy or include it as an add-on to their existing property insurance policy.

Businesses in high-risk industries such as manufacturing, hospitality, or retail may find it more challenging to obtain business interruption insurance due to the increased likelihood of disruptions.

However, many insurance providers offer tailored policies to meet the unique needs of businesses in these sectors.

Business interruption insurance can be purchased by businesses of all sizes, from small sole traders to large corporations.

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Business interruption insurance is a type of insurance that can be part of a standard business policy form or purchased as an endorsement to a property insurance policy. It covers operating expenses and lost income for a set period of time incurred by a company that closes or is unable to operate normally.

It can help offset income losses along with continued necessary day-to-day expenses such as payroll and taxes. This type of insurance is especially useful for businesses that rely heavily on physical property, such as retail stores.

For example, if a fire renders a retail store unusable, business interruption coverage could help the business stay afloat during the time it is closed for repairs.

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Insurance is a type of financial protection that helps mitigate losses due to unforeseen events. It can be purchased as a separate policy or added to an existing one, such as a property insurance policy or package.

Business interruption insurance is a specific type of insurance that helps companies cover operating expenses and lost income when they're unable to operate normally due to physical damage to their property.

This type of insurance can be a lifesaver for businesses that experience unexpected closures or disruptions, such as a fire that renders a retail store unusable.

Business interruption coverage can help offset income losses, including continued necessary day-to-day expenses like payroll and taxes.

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Business interruption insurance can be a game-changer for many businesses, but do you really need it? The answer depends on your company's size, industry, and financial situation.

If you have a small business with limited financial resources, you might not be able to afford the premium costs of business interruption insurance.

Businesses in high-risk industries, such as construction or manufacturing, are more likely to benefit from business interruption insurance due to the high likelihood of unexpected events.

Your business's financial stability and ability to adapt to unexpected events also play a significant role in determining whether you need business interruption insurance.

If you have a solid emergency fund in place, you might be able to weather a temporary business interruption without insurance.

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Understanding your policy is key to making the most of your business interruption insurance. There are many nuances with business interruption cover, including different cover for different sectors.

It's essential to know what you're covered for and what you're not. This includes understanding your indemnity period, which is how long you're covered for.

The structure of your policy is also crucial to understand, including what specifically you have cover for. Knowing your cover limits is vital, as it sets the maximum values you're able to claim, including claims preparation costs.

Be aware that your policy may have exclusions, which are specific circumstances that aren't covered. Sub-limits are another important consideration, which cover organisations when they have limited or no immediate material damage but are still unable to trade at full capacity due to external factors.

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Lodge an initial claim with your insurer or broker promptly, without specifying an amount being claimed. This is the first step in the claim process.

Request an upfront progress payment, but make sure you have a high-level view of the value of the claim to support your request. This can be a critical cash boost to help with ongoing expenses like wages and rent payments.

Ensure you act in a manner to minimise the extent of the overall loss, as your insurer has the same obligation.

To prepare a comprehensive claim, work with your broker and advisor to gather evidence of profit lost, additional costs incurred, and claim support costs. Consider photos to show the impact and damage to your business and maintain a record of key events and the timeline after damage has occurred.

Here are the five key components to the overall claim:

A business interruption claim can only be triggered by a physical loss or damage to property that's covered under your policy. This means you'll need to review your policy to see what specific events are included.

The policy will describe the specific events that trigger your business interruption coverage, so it's essential to understand what's covered. This way, you can plan and prepare for any potential disruptions.

If a covered event occurs, such as a natural disaster or theft, you may be able to file a business interruption claim. However, the claim will only be valid if the loss or damage is a direct result of the covered event.

In any case, it's crucial to carefully review your policy to understand what's required to trigger a claim. This will help you avoid any confusion or delays in the process.

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Lodge an initial claim with your insurer or broker promptly, without specifying an amount being claimed. This gets the ball rolling and ensures you receive the support you need during a challenging time.

Request an upfront progress payment, which can be a critical cash boost to help maintain ongoing wages and rent payments. However, don't rush the actual claim, as it's essential to get all the proceeds you're entitled to.

Ensure you act in a manner to minimise the extent of the overall loss, as your insurer has the same obligation. This might involve taking steps to mitigate the damage and reduce the impact on your business.

Request copies of your current business interruption and material damage policies, and review your claim limits, exclusions, and key time periods. This will help you understand what's covered and what's not.

You should speak with your broker as soon as possible to notify them of your intention to make an initial claim submission. They'll be able to guide you through the process and ensure you receive the necessary support.

The insurance underwriter will appoint a loss adjuster to assess the claim, so it's essential to work with your broker and external advisor to provide input and review. This will help ensure the claim is handled fairly and accurately.

Your claim will need to provide evidence of profit lost, additional costs incurred, and claim support costs. Consider taking photos to show the impact and damage to your business, and maintain a record of key events and the timeline after damage has occurred.

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Here are the key steps to follow when lodging a claim:

The cost of business interruption insurance in NZ depends on several factors, including industry, number of employees, amount of coverage, and prior loss experience.

Your location can also impact the price of the policy, with areas having a higher risk of certain covered perils resulting in increased costs.

Businesses in high-risk areas may need to pay more for their business interruption insurance.

To give you a better idea, here are the factors that affect the cost of business interruption insurance:

You may also want to consider adding extra coverages to your policy, such as:

The cost of business interruption insurance is a crucial factor to consider when deciding on a policy. It depends on several factors, including industry, number of employees, amount of coverage, and prior loss experience.

Industry plays a significant role in determining the cost of business interruption insurance. For example, if your business is in an area with a higher risk of certain covered perils, the cost of the policy may increase.

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The number of employees also impacts the cost of business interruption insurance. This is because larger businesses typically have more complex operations and greater potential for losses.

The amount of coverage you choose is another critical factor in determining the cost of business interruption insurance. This will be a key consideration when working with your agent or broker to determine the right amount of coverage for your business.

Prior loss experience is also a factor in determining the cost of business interruption insurance. If your business has a history of losses, you may pay more for coverage.

A business's location can impact the price of the policy. For example, if the business is in an area with a higher risk of certain covered perils, the cost of business interruption insurance may increase.

Here's a breakdown of the factors that affect the cost of business interruption insurance:

As you review your business interruption needs, it's essential to consider additional coverages that can provide extra protection for your business. Extra expense insurance is one such coverage that can cover necessary expenses during the period of restoration that the business would not have incurred if there had been no physical damage to the property.

These expenses typically relate to minimizing the time the business is wholly or partially closed and/or keeping the business running during the restoration period. For example, expenses related to temporarily relocating business operations to another building, or the need to pay overtime to hire more employees.

You may also want to discuss whether ordinance or law coverage is included or can be added with an endorsement. This coverage can provide protection for the additional cost to repair a building to bring it up to code.

Civil authority coverage is another important consideration. This coverage extends business interruption coverage to losses incurred when an order of civil authority prohibits access to your business premises resulting from physical damage caused by a covered peril to adjacent or nearby property.

Here are some examples of additional coverages to consider: