According to Tower Insurance, one of the country’s oldest and most trusted providers, and Patron of Business Mentors New Zealand, some companies are trimming the scope of their insurance cover in a bid to cut costs.

However, Tower warns this false economy could leave businesses open to huge bills and in many cases force their closure. Tower is asking business mentors to help guide their clients away from underinsuring.

“As 2011 gets underway, it is becoming clear some business owners think they can get away with spending much less on insuring their companies. They are being more selective, only taking out small chunks of insurance and not protecting their businesses to the full extent.

They don’t think it’s necessary and they don’t want to spend the money. We’re asking BMNZ’s 1700 mentors to be on the look out for client companies that might be falling into this trap and counsel them against it,”says Julian Lough, National Manager – Commercial Sales at Tower Insurance.

“This year is going to be financially challenging for many businesses but now is not the time to be cutting back on insurance. If another natural disaster or other unforeseen situation occurs, then being underinsured or not having the right type of insurance could be the final straw for many companies that are already struggling.”

Julian points out that most New Zealand business owners only realise their mistake when they make an insurance claim, at which point it is too late to rectify. He advises catching up with an insurance advisor at least once a year to check that the business is adequately covered.

“Businesses change over time – new equipment is invested in, replacement costs for items go up and premises are upgraded,” says Julian. “If the insurance policy is not kept up to date, the company could end up being horrendously underinsured and financially unable to get the business up and running again should something awful happen”. 

“Contrary to popular belief, fully insuring a business does not have to cost the earth. As an example, for the cost of a cup of coffee a day (which equates to about $1,300 per year), a company could be covered against a number of eventualities, giving the business owner sense of security and enabling them to keep their doors open.

 It is so important that New Zealand businesses look ahead and consider the long term implications of cutting insurance corners. We have lost enough companies over the past few years, with the economic downturn taking its toll. Let’s not lose anymore when the cost of that cup of coffee could be enough to prevent it.”

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