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It is brilliant to see that New Zealand is doing well in bringing the virus under control, but none of us know for certain how COVID-19 will impact us long term.
In times such as these, 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 tough financially, businesses and individuals are understandably asking whether a bit less cover here or there will actually make any difference.
With thanks to Professor Allan Manning of LMI Group, here’s some reasons why:
Fires, storms, earthquakes and floods. These all occur frequently in NZ, considerably more often than pandemics do. BI insurance is often bought alongside a material damage (MD) policy that insures business assets from physical loss or damage caused by natural disasters.
You may be tempted to consider reducing or cancelling BI cover for the sake of saving in premium. However, the reduced cover could mean the difference between a going concern and having to close your doors for good, should a natural disaster hit.
Public and Products Liability
You will often hear about the difference between liability wordings. Some are known as ‘Claims Made’ wordings and others are called ‘Loss Occurring’ covers.
Both of these cause traps for the unsuspecting policyholder in different ways, 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 the 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.
Be careful about 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. It is best that you talk to your broker before making the decision to let this one go.
Given that fewer of us have been driving, you might be wondering whether vehicle insurance premiums should be reduced or cancelled altogether.
The issue is that 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.
To get the coverage you need and avoid paying for what you don't, speak to one of our experienced team members today!