The events of the past year have shown that the unexpected can (and does) strike at the heart of otherwise thriving Kiwi business. When things go wrong, having the right insurance cover can be the difference between a manageable glitch – or the end of the road.
If you have a young or newly-started business, you might be looking at insurance cover for the first time. Or, if you’ve been in business for a while, are you confident that your existing cover is the best fit?
Apex Advice Group provides independent advice on all aspects of Personal and Business Insurance, and works closely with KPMG on business risk assessment. They offer the following expert tips on getting the balance right:
1. Look at it this way.
Firstly, you may need to change the way you think about insurance. Not as a ‘necessary evil’, or an empty cost – but as an effective tool to help run your business.
Going through this exercise - preferably with the help of your adviser - will give you fresh insights into the value of your business.
Start by identifying and prioritising the different risks in your business, then focus on the best solution for each. This could include: eliminating or off-loading the risk; making operational changes to reduce it; and/or applying an insurance cover to manage it.
2. Cover the right bases.
Each business requires a mix of policies that’s customised to suit. But as a rule of thumb – your insurance should cover your critical risks, and enable you to stay in business should something happen. You’ll also need sufficient cover to satisfy the bank and other stakeholders.
There are four broad categories to consider:
Property & Assets Insurance: will protect your business assets from unforeseen events, such as fire, damage or theft. It can cover everything from your building or property, technology or tools, right through to your vehicle fleet.
Business interruption insurance: is particularly valuable for SMEs. It covers operating expenses and fixed costs (such as rent, utilities and wages) which continue even though your business activities have come to a temporary halt.
Liability insurance: provides protection if your business (or people) are held legally liable for causing damage, injury or loss to a third party. There are various types of liability insurance; and Apex offers packages that are designed for Kiwi businesses.
People-related insurance: can also protect your business when something happens to a “key person” within the business; or a shareholder makes an unplanned exit; or you suddenly need a lump sum to repay debt.
3. Review (at least) once a year.
Your business evolves over time – and your insurances should too. Apex recommends that you review your insurance cover with every key change; or at least once a year. Cover should be adjusted to reflect: changes in revenues, new plant and equipment, asset depreciation, adjusted debt levels, and any changes in shareholding or key people.
Your adviser will run through a checklist of changes, to ensure your cover is up-to-date and fit-for-purpose. They can explain exactly what you’re covered for, and just as importantly, what you are not insured for.
4. Get good advice.
A well-structured insurance programme, supported by quality advice from a reputable independent broker, is one of the best investments you can make in your business.