Identifying and managing your key risks as well as having appropriate business insurance and cover amounts in place are essential to ensure your business is better placed should the worst happen.
In business, as in life, there are always risks. Fire, theft, fraud, cyber-attacks, damage to stock and premises, accidents and other events outside your control can cause major harm to your business or even close it down. Successful business owners have the ability to manage their risks, by:
Taking action to mitigate them (e.g. installing sprinklers or burglar alarms); and
Taking out insurance so that if something does happen, the effects are minimised and their business can continue to operate.
This article outlines how you might reduce your risks (and your insurance costs), assess your insurance needs, and get the right cover in place for your business.
Reducing your risks and costs
Here are some tips to help you manage your business risks and smooth out the unlikely event that something goes wrong in your business.
Liability – your business activities could create commercial and civil liability which can have an adverse effect on your livelihood. Liability is a hard risk to manage and even the best run businesses cannot foresee all liability they could possibly face. Liability exposures can be reduced, minimised or eliminated by arranging protection in the form of insurance.
Business data – your business data (e.g. your customer database) is a key asset, so you need to protect it. Back up the data files you’ve been working on every day, and do a more comprehensive system back-up weekly or monthly. Invest in a reputable IT company to help identify your risks and protect vital customer and business intellectual property from being compromised. You also need to consider how changes in the regulatory environment, for example, GDPR or the Privacy Act affect how you do business.
Money – reduce the amount of cash kept on your premises by encouraging EFTPOS transactions, banking cash frequently, and paying employees by direct credit. Avoid a set pattern or time for banking to frustrate potential thieves.
Vehicles – if you use your car for business, make sure it has business insurance cover – while it’s usually a bit more expensive, it generally offers a solution better suited for business owners.
Stock – if you’re insuring your stock or products, remember that most insurance policies will only pay out for lost stock at wholesale value, not retail – so it is important to regularly review the value of the stock you hold.
Working from home – if you work from home, some items such as computers and other office equipment, and your vehicle, may no longer be covered by your domestic insurance policy – check the cover on your existing home or contents policy or speak with your insurer.
Review your insurance regularly – your business changes over time (for example you might get bigger, hire more people, have a higher turnover or enter a new line of business), so it’s important your insurance changes with it. Sit down with your insurance company or broker at least annually to assess whether you have the right level of cover, and whether you have new or different risks you need to insure against.
Remember, most business insurance premiums are tax deductible as business expenses.
Assessing your insurance needs
When it comes to business insurance, one size does not fit all. There’s a whole range of options and it can be confusing.
What type and how much insurance cover you need depends on your business. If you’re a consultancy services business, your focus might be on insuring against potential liability arising from the advice you give to clients. If you’re a manufacturing business you may need to think about insuring your plant and stock so you can continue to make your products, or the likely impact of product malfunction or contamination. If you’re a tradie, you may want to insure your tools and your vehicle. You should also consider your ability to continue earning by having income protection in case something happens to you and you can’t work.
That’s why having an expert by your side is important. They will be able to:
Sit down with you and make an assessment of your business.
Identify the different risks and exposure presented by your business.
Draw up a comprehensive plan to offset some of those risks with insurance solutions and showing you what fully insured looks like.
Help you make a more informed decision on choosing the appropriate cover levels for the exposure you face (generally referred to as sum insured).
Regularly review your insurance needs on an ongoing basis.
Types of business insurance
To help you think through your needs, here’s a list of the main types of business insurance available.
Business asset insurance
Business asset insurance covers against the risk of accidental loss or damage to physical assets such as your property or buildings, machinery, materials, stock, tools, fixtures and fittings, office equipment and other contents, even your customers goods in trust.
Business interruption insurance
If your business is unable to operate normally (for example, because of fire, flood, burglary or the breakdown of a critical machine or equipment), business interruption insurance covers you for things like staff wages and lost income while you’re unable to trade. Generally the amount you are covered for is based on a prior assessment of your business’s Gross Profit calculation. Even accountants can misunderstand the cover and levels of protection so it is important to regularly review this cover (at least annually).
Business liability insurance
This covers you if you have to pay legal defence costs or expenses for injury or damage to other people or their property caused in the day-to-day operation of your business. Depending on the type of business there are different types of exposure you can protect against, including:
Public liability – if you or your staff cause accidental damage to someone else’s property (for example if you run an arborist business and one of your employees accidentally damages someone else’s property while trimming trees).
Statutory liability – if you unintentionally breach an Act of Parliament covered by the policy (for example, if you’re a retailer and you’re found to be in breach of the Fair Trading Act, or a builder or tradie found in breach of the Health and Safety at Work Act 2015, you may face prosecution and incur legal defence costs).
Employer’s liability – cover for accidents and illness to your employees that aren’t covered by ACC (for example, reparation costs you may be required to make to an injured employee).
Professional indemnity – if something goes wrong as a result of the advice, services or designs you provide (for example, if you’re a designer and you design a product that breaches copyright, or if you certify work as compliant and it turns out it’s not).
Directors and Officers liability - designed to provide financial compensation to help defend directors and officers against allegations of mismanagement whilst they carry out their day-to-day management duties.
This covers you against financial loss following hacking or attacks on your electronic systems and data, as well as legal costs and expenses relating to third-party claims (for example failure to keep data secure).
Business vehicle insurance
This covers you against loss or damage to your vehicles, as well as damage caused by your vehicles. This is particularly important if your vehicles are key to the operation of your business (for example to deliver your products or to get to jobs) and if so, you need to consider loss of use cover while the vehicle is being repaired.
Life / key person and disability insurance
People are the lifeblood of any business – and this type of insurance protects against the impact of you or your key staff members being unable to work. For example, it could cover the cost of employing replacement cover if you can’t work due to illness or injury. Or, it could compensate you for the loss of a staff member with critical business expertise or relationships if they suffered illness or injury.
How ANZ can help
We are proud to partner with specialist risk and insurance businesses who can work alongside you to customise a plan to suit your business needs. Our partners include Crombie Lockwood (NZ) Limited who specialise in business insurance and Cigna Life Insurance New Zealand Limited who specialise in life insurance. An ANZ Business Specialist will be more than happy to put you in touch with the right person to get the ball rolling. And they will offer you no-obligation advice that has your best interest at heart.
This material is provided as a complimentary service of ANZ. It is prepared based on information and sources ANZ believes to be reliable. Its content is for information only, is subject to change and is not a substitute for commercial judgement or professional advice, which should be sought prior to acting in reliance on it. To the extent permitted by law ANZ disclaims liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omissions by any person in relation to the material.
This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you wish to consult an ANZ Business Specialist, please contact us on 0800 269 249.
IMPORTANT: This is a summary only of cover and features that may be available. Terms, conditions and exclusions apply. For more details contact any ANZ Business Centre or phone 0800 269 249.
Our business insurance solutions are underwritten by third party insurers. All insurance products are subject to terms, conditions and exclusions set out in the applicable policy document. No member of ANZ Bank New Zealand Limited (ANZ) or its related companies guarantees the underwriters and insurers, or any of the products issued by them. ANZ may receive commission on any policy it arranges or on any referral to Crombie Lockwood (NZ) Limited and/or Cigna Life Insurance New Zealand Limited.