There are many different types of commercial insurance, from those that cover physical property to those that cover income and cyber security.
Types of commercial insurance
There are 5 main types of commercial insurance:
- commercial property
- commercial motor
- business interruption
Whether you're a small business owner or a Body Corporate, commercial property insurance can be complex. It pays to consult an insurance adviser to help you assess your requirements and the range of products and solutions that are available.
Discussing your property portfolio insurance with the specialists will not only help you understand the various solutions, but also make you aware of the local and international relationships that can help achieve the cover you need. This may be in the areas of
- natural disasters
- fire, flood and accidental damage
- breakdown in service machinery such as lifts and air-conditioning systems
- loss of rental income
- liability risks.
Often commercial property insurance requires finding either co-insurers to share the risks with or developing a layered structure. These insurance structures can be complicated — this is where professional advice is invaluable.
Advisers can help you consider everything from setting premium allocations, premium financing and premium collection to competitive pricing, coverage, exclusivity and other added value benefits.
Commercial motor insurance is similar manner to personal motor insurance in that is allows an entity to take out comprehensive cover, third party cover, or third party, fire and theft cover.
Commercial motor cover may extend to commercial vehicles, company cars, business fleets and motorcycles.
When you suffer a business interruption, the financial loss can be more devastating than the physical loss.
Business interruption insurance (or business continuity insurance, as it's sometimes known) can help minimise the financial impact if an interruption to your normal business operations occurs following a physical loss to your assets.
Business interruption insurance is designed to
- help you to carry on through the event and after the damage has been repaired
- help fund your increased operational expenses
- inject lost profits into your balance sheet.
Business interruption cover can also be purchased to protect the income or profit of a business following insured loss or damage. This type of insurance may cover
- gross profit
- redundancy payments
- additional costs of working
- reinstating records
- loss of rents.
Business interruption policies are commonly extended to include suppliers, customers, denial of access and public utilities extensions.
Business interruption insurance makes sure you have the necessary funds to
- maintain your income stream while your doors are closed
- pay for additional expenses, such as temporary premises or additional costs to source product
- advertise to let customers know that you have moved to a new location or any other effects of the business interruption
- meet financial obligations to the bank, shareholders and staff.
Legal liability can take many forms. Commons types include:
- negligently causing loss to someone else's property or business
- negligent professional advice when providing professional services
- unintentionally breaching a statute
Liability insurance can also take many forms.
For individuals acting in their private capacity, motor vehicle insurance covers the insured for damage to others' property while driving.
For people acting in a commercial capacity, the main forms of commercial liability insurance are
- general public and products
- employment practice
- professional indemnity
- directors' and officers'
- trustees cover.
As always, the terms and conditions of each policy will vary. It is important to read your policy wording and seek advice from your insurance adviser.
General public and products liability
The most basic form of liability insurance is public liability. It provides legal liability protection from damage to third party property or bodily injury.
This type of cover is important for anybody who occupies or leases property in connection with their business, and/or provides a service away from their premises (such as a decorator, painter, motor mechanic, electrician, plumber).
Products liability cover is important for anybody supplying products such as a retailer, importer/exporter or manufacturer. Cover includes defence costs which are usually in addition to the limit of indemnity.
Public and products liability insurance is occurrence (event) triggered.
Employers' liability insurance provides cover for personal injury to any employee of the insured. This includes any obligation for which the insured may be held liable under the Injury Prevention, Rehabilitation and Compensation Act 2001, or any similar or amending legislation. Cover includes defence costs.
Employers' liability insurance is triggered when a claim is made.
Statutory liability insurance provides legal defence protection and cover for fines for some breaches of statute, such as the Resource Management Act, Financial Reporting Act and Building Act. Occupational Health and Safety legislation prevents parties from insuring for workplace health and safety fines. Cover includes defence costs.
Statutory liability insurance is triggered when a claim is made.
Employment practice liability
Employment practice liability insurance provides protection for legal defence and court awarded settlements for employment law breaches. Cover includes defence costs.
Employment practice liability insurance is occurrence (event) triggered.
Anyone who holds third party goods or property under their care, custody and control has a bailees' liability exposure. Cover includes defence costs.
Bailees' liability insurance is occurrence (event) triggered.
Professional indemnity insurance provides protection against liability costs arising from the provision of incorrect or faulty professional advice or design, as well as defamation. Cover includes defence costs.
Professional indemnity insurance is triggered when a claim is made.
Directors' and officers' liability
Directors' and officers' liability insurance provides protection for directors and officers for wrongful acts committed within their capacity as a director or an officer. Cover includes defence costs.
Directors' and officers' liability insurance is triggered when a claim is made.
Trustees cover is designed specifically for trustees for cover under the above-mentioned policy categories.
Cyber insurance assists with the financial costs associated with a cyber event.
Cyber insurance can cover first and third party losses. First party losses are losses suffered by the insured. Third party losses are losses suffered by a third party because of the actions of the insured, and for which the insured is (or may become) legally liable to compensate the third party for.
Some insurance policies also provide enhanced benefits such as a retained response team of IT, legal and public relations professionals, who are on standby to respond to an event as soon as it happens.
Not all cyber insurance is the same. The scope of cover offered by each insurer will be outlined in full in their policy wording. As with any type of insurance, we strongly recommend you read and understand the policy wording before buying. If you have questions about the cover offered, you can seek advice from your broker or an independent legal adviser.
The following ICNZ members currently offer standalone cyber insurance policies:
- Lloyd's — contact Scott Galloway, Lloyd’s general representative in New Zealand on (04) 472 7582 or email@example.com