Insurance policies and advice Ngā kaupapa here inihua me ngā kupu tohutohu

Insurance is a specialist area. Many people wrongly assume they can get one insurance policy, or a package of policies, that covers all their business activities, but that’s not the case.

Insurance policies are also legal documents, with language that can be specific and complex.

An insurance broker can help you: 

• understand anything that’s unclear 
• find policies that suit you. 

Choose a broker with experience advising businesses like yours. It’s a good idea to ask people in businesses like yours if they know a good broker.

Going at it alone and getting your cover directly through an insurance company can be cheaper, but you might sign up to a policy that doesn’t cover all your needs.

 What brokers do 

The first thing a good broker will do is assess the risks you face. You then have two choices:

• Lower these risks by making changes in your business.
• Pass on the risks to a third party (an insurer). 

If you choose to get insurance, your broker will help you find the right cover at the best price. 

Brokers must be registered to operate. Search the Financial Service Providers Register to find out if they are.

Prepare for advice

To speed up the process of getting insurance, do these things before meeting a broker:

• Put a realistic value on your assets – find out how much it would cost to replace the items you want to insure.
• Get a set of current accounts and find important numbers, for example gross profit. 
• Gather relevant facts about your insurance history, for example past claims.
• Look at your business processes to spot risks. What might happen if you, a major client or supplier suddenly has to stop trading? 

Insurance policies are legal documents that you need to read and understand carefully. They might contain jargon or legal terms you haven’t come across before or don’t understand. If in doubt, talk to an insurance broker before you sign any policy.

Disclosure

By law, you must give your insurer:

• all details they ask for
• any other information that may influence your policy – for example about workplace accidents or past claims. 

If you don’t tell the truth, you may not be paid out on your claims. If you run your business from home, tell your insurer – you may have to change or increase your domestic insurance. If you drive your own vehicle for work, tell your insurer how much you use it – for example, 10% of your working time.

Excess

This is the amount of money you agree to pay towards fixing something, for example damage or a claim against you. This is agreed when you take out or renew a policy.

Excess is usually a dollar figure – for example, you pay the first $350 of any claim. It can also be in time – for example, no insurance cover for the first two days of your claim.

The lower the excess, the higher your premiums will be. Think about:

• how much extra you’re paying a year to bring down your excess
• if it’s worth paying higher premiums, if you are unlikely to make many claims.

A suitable excess level depends on:

• how much risk your business has
• how likely risks are to occur
• what the potential cost of losses are.

An insurance broker can help you find the right level of risk for your business.

Managing risks

If something goes wrong, you must do your best to put things right. Your insurance is there to help cover the costs, not do the whole job. Make sure you tackle problems head on. Don’t wait for insurance cover to kick in before acting.

Avoid these common insurance mistakes:

• Not reviewing the sums insured – make sure you review how much you need covered at least annually, or after any major change to your business, for example new premises or product line.
• Not telling your insurer about important changes, for example to your business model – you can’t claim for something not covered in your policies.
• Not telling your insurer the whole truth, for example a legal issue you didn’t mention – keeping back crucial information can lead to a rejected claim.
• Thinking insurance policies make your risks go away – the risks are always there, but the right policies will help you manage if something goes wrong.