None of us know how the situation with Covid-19 is going to play out. Right now, thankfully, New Zealand’s doing well in bringing the virus under control, but the extent of financial hardship and impacts to businesses across the country is being laid bare.
At a time like this, the rationale for insurance can be called into question, especially when pandemics generally aren’t covered by business interruption (BI) policies. When the going gets really tough financially, businesses and individuals are understandably asking whether a bit less cover here or there will actually make any difference.
So, will it?
Turns out now, more than ever, is the time to hang on to your cover. With thanks to Professor Allan Manning of LMI Group, here’s some reasons why:
- BI cover – Fires, storms, earthquakes and floods. They happen in NZ with scary regularity and - to state the obvious – considerably more often pandemics do. BI insurance is usually bought alongside a material damage (MD) policy that insures business assets from physical loss or damage caused by natural disasters.
In the wake of Covid 19, it can be tempting to consider reducing or even cancelling BI cover. But for the sake of a very small saving in premium, the reduction in cover could mean the difference between a going concern and doors closed for good should a natural disaster hit.
- Public and Products Liability - You’ll often hear about the difference between liability wordings. Some are known as ‘Claims Made’ wordings and others are called ‘Loss Occurring’ covers.
In different ways, both cause traps for the unsuspecting policyholder, particularly when they’ve made the decision to close their business or not renew due to financial constraints.
Business owners quite often don’t understand the ramifications of what could occur if your Public and Products policy is lapsed or cancelled. Do you still carry some risk? The answer is yes.
This comes down to what sort of event could occur and how it fits in with definition of ‘occurrence’ or ‘Event’ in the policy. Before you make a decision to cancel, discuss with your insurance broker exactly what the impact in doing so would have on your business.
- Professional Indemnity – Similarly, be careful simply letting Professional Indemnity cover lapse from expiry or cancelling it mid-term. While this could be because you’re closing your business or the premiums have become unaffordable, you may be creating a huge trap for yourself.
This is because Professional Indemnity works on the basis that a current policy responds to any claim first made to the insurer during the current period regardless of when the wrongful act that gave rise to the claim took place.
So, if you performed work two or three years ago and then your client decides now (two or three years later) to make a claim against you for an act, error or omission arising out of the past work you performed, it’s the policy currently in force at the time the potential claim is made and notified that will respond. Best to talk to your broker before making a call on letting this one go.
- Vehicle insurance – Over the past few weeks, questions have been raised about vehicle insurance premiums being reduced or cancelling cover altogether, given fewer of us have been driving.
Cars can still be damaged even while parked on the street - from a passing vehicle, theft or damage by thieves, or storm damage. A car, like your home or your business, needs to be insured to provide you with financial protection.
Insurance premiums are constantly being tweaked using sophisticated modelling and the drop in vehicle accidents will likely be reflected in future premiums. We’ll keep a watching brief on that one, but again, we’d recommend not cancelling insurance thinking it’s a money saver – it rarely is.
For a confidential conversation about your insurance program, contact one of our members today
General Advice Warning
The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.