All those responsible for operating businesses should consider whether they have the right insurance policies and level of cover for their needs.  For many businesses in New Zealand – including those in the restaurant industry – when the unforeseen happens having the right business insurance policies may be the difference between surviving, or not.  So, what kinds of business insurance should you be considering?

First, you need to identify the specific risks to your business.  While this article provides a general overview of some types of insurance cover, risk identification, mitigation and prevention are important.  When you are aware of the risks to your business, you will be more likely to identify those risks over which you have some measure of control and take steps to reduce the risk occurring or be able to reduce the impact on your business by having plans in place to address the risk if it arises.  Good business planning is important.  Insurance does not cover all risks. 

In terms of specific policies you should consider, across the restaurant sector there will be different requirements depending on whether the premises are leased or owned, whether the business owns any vehicles and how much protection you want or can afford.  In addition, there is a range of statutory obligations, such as under the Health and Safety at Work Act 2015, for which you may want to have some liability cover in place. 

Regardless of the size of your operations or location, some level of business interruption insurance and protection for the business’ physical assets is likely to be the minimum requirement.  Some liability insurance should be seen as important cover too. 

Business Interruption Insurance

If normal business operations cannot continue as a result of an unforeseen event, business interruption insurance provides cover for loss of profits and any increased costs incurred to get the business operating again.

The COVID-19 pandemic highlighted the reasons for having business interruption insurance (even though this type of insurance usually excludes pandemics).  There has been a substantial amount of litigation around the world as businesses have sought to have insurance meet various costs associated with lockdowns.  Success in each case depended on the specific terms of the policy. 

Material Damage / Assets Insurance

Any property owned by your business should be insured so that in the event of loss or damage, you can have the asset repaired or replaced (the cover available will depend on the specific terms of the policy).  Given increased costs in recent years across multiple sectors, you should review whether the level of cover you have is still appropriate.  If all your business contents (and premises, if you own them) were destroyed, would you have sufficient cover?

Some Other Types of Cover to Consider

Key person insurance policies which provide financial assistance in the event a business loses a key person due to serious illness, injury or death might also be advisable.

Another type of policy you may want to consider is directors and officers’ liability insurance.  This provides protection for directors and officers and employees involved in the management of a company from personal loss resulting from legal claims made against them due to functions and duties they have performed on behalf of the company within their capacity as a director or an officer.

Cyber insurance, which helps businesses recover from a cyber attack, is also something to consider if disruption of your business’ IT systems could significantly harm your business.

Liability Insurance

There are various types of liability insurance products and they include cover for legal defence costs.  A public liability policy provides cover in the event of damage to other people’s property caused by something you or one of your employees did (which you should not have) or something you or your employee did not do (which should have been done) is a standard type of policy a business will often have.  Bodily injury is typically covered to the extent it is not covered by the ACC regime.  A statutory liability policy can provide legal defence protection and cover for fines for some breaches of statutes.  While fines cannot be insured, insurance can cover reparations and defence costs.

Action Point

Business insurance policies provide financial protection from sudden and unexpected events that could cost you dearly.  Each year consider whether you have the right insurance policies and amount of cover in place.  We recommend you consult an insurance broker who can help you assess the unique requirements of your business and the best options for you.  If you have a query about a specific term in your policy, get in touch about how we can help.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.