Lack of business interruption insurance a threat
Lack of business interruption insurance a serious threat to small business
Many of New Zealand's small businesses risk financial hardship because they have inadequate or no business interruption insurance - cover for a business's cash flow while it gets back on its feet after a major loss.
As demonstrated by last month's Gisborne earthquake, a natural disaster can bring many small businesses to a halt with loss of stock and damage to their equipment and premises putting them temporarily out of business.
As a result, the interruption of services, loss of business income and extra expenses incurred can cause financial hardship for any small business.
Head of NZI Ian Foy says there is limited awareness in the small business community on the extent of the business interruption underinsurance problem.
"Our experience shows that up to 75 percent of small businesses have no business interruption cover or are inadequately covered," Mr Foy says.
"Most small businesses have no idea they have inadequate business interruption insurance until it's too late. It's only after they experience a major loss that the problem comes to light."
"Business interruption insurance works as a partner to a material damage policy. Small businesses are insured for business interruption from a natural disaster provided the damage is covered under a material damage policy."
"It can take months or even years to rebuild after a major loss, yet few small businesses can afford to stop trading or operate at reduced capacity for a significant period of time," Mr Foy says.
Small businesses need to review their business interruption insurance cover to ensure it's adequate for the length of time their business may be out of action should a natural disaster occur.
Insurance brokers are best placed to provide a professional assessment of small business insurance and risk management needs and consideration of the range of material damage and business interruption cover required.