8 important points RE Public Liability insurance NZ
Failure to understand advantages of public liability insurance can be dangerous to your business and very expensive for you as the business owner. Many New Zealand business owners have realized this through rocky road as they had paid huge amounts of money to settle third party claims due to not having public liability insurance in place. Some had a policy in place but failed to maintain right amount of cover they had to have. This problem is common for small businesses as well as for large companies.
Firstly – Kiwi business owners should know that Public Liability insurance is a must have product which unfortunately not yet specified by law. If you are in business it is no longer good enough to have “she will be right” approach. The cost of Public Liability insurance is a fraction of your business turnover – so do not think twice – ask the policy to be issued. This is the case of better be safe than sorry.
The business owner and the business are going to be protected by Public Liability insurance and have the means to pay third party claims due to bodily injuries or damage to other people properties while conducting business.
It is not illegal for the business to conduct business activities without public liability insurance, however, it is your duty as the Director to provide compensation and in New Zealand majority of the company Directors provide their personal guarantees. Personal guarantees mean that if you find to be liable and you do not have public liability insurance or sufficient amount of cover – you are going to pay in full from your personal assets.
Light commercial / rural
Industrial / heavy commercial
Secondly – the Director as well as management of the company has to know what is covered by the company’s public liability insurance, the policy limits and geographical location it covers.
Typical public liability insurance covers the following:
What is covered by Public Liability Insurance NZ?
- personal injury; or
- damage to property
Limit of indemnity Public Liability Insurance
The total amount payable by your insurance company for all amounts in respect
- one occurrence or series of occurrences as a result of or attributable to one source or original cause;
- any one period of insurance for all claims in respect of products; and
- any one period of insurance for all claims in respect of releases (including discharge, dispersal, seepage, migration and escape) of pollutants will not exceed the limit of indemnity amount shown in the schedule irrespective of the number of parties entitled to indemnity
Make sure that your company’ public liability insurance (if you have one) pays compensation for court appearance. The policy should provide your company for defamation or invasion of right of privacy.
Cover you for your legal liability to pay direct compensation as a result of damage to the personal effects of your employees.
Thirdly – when considering public liability insurance, you need to tell insurance company all about the nature of your business. The insurer needs to know all about your business operation in order to rate your risk (your business is risk for the insurer). It starts with location – some locations represent higher level of danger to compare to others. For example, a jewellery shop in Manurewa and in Takapuna – not hard to understand that from the location and risk point of view Manurewa is going to be rated higher to compare to Takapuna.
Another example: a builder who works in residential sector, once he decides to provide his services in commercial sector cost of his Public liability insurance will increase. The increase is based on the higher costs of the projects he is going to work on which subsequently means higher exposure for the insurer. The insurer needs to be advised about the change in area of operation. If the builder fails to notify the insurer the policy can be cancelled from inception if there is a potential claim. Keep in mind for a commercial builder public liability insurance is usually dear to compare to domestic.
If your business only provides services in New Zealand – your insurance company rates it less risky to compare to a company which occasionally works outside of New Zealand.
In New Zealand big insurance companies prefer to have less risky business in their “book of business” while the small ones are forced to have riskier businesses only due to the fact that this is where they can become more attractive to the prospective clients. It is quite common in New Zealand that insurance companies who do not pay claims happy to accept wider risks while the companies with excellent claims reputation prefer not to provide their policies to businesses with highly potential claims exposure.
For instance, if your business is outside of the insurer’s appetite you would have to ask for quotes from a different insurer one only due to the reason that your industry is not preferable by the first one.
Builder Public Liability Insurance
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*Premiums for indicative purposes only. Each application is rated subject to work conditions you have. Please submit your application to get exact premiums for your business.
Premium excl GST and it's not available for businesses that
- are involved in commercial developments that exceed $500,000
- have a turnover greater than $2m
- have more than 10 employees
- operate outside New Zealand
- have had insurance declined, cancelled or refused
- have had a claim lodged in the past 3 years
Fourth – do not assume that you will be spared from any form of public liability claim. Many businesses and their owners have realized that you cannot predict the future and for as long as the business continues to operate, the risk of accidents and injuring people and damages to other people properties are always there. Thus, it is better to be prepared and have your company protected with public liability insurance to address the financial requirements when third party claims occur.
Fifth – amount of insurance coverage is depends on many variables such as nature of your business, the risk involve when it comes to your business activities, and the probability of third party claims arising in the future. You might discover that different industries have different minimum standards when it comes to minimum amount of public liability insurance to undertake. You will also realize that if you work on government projects there is a specified amount of insurance that you need to undertake in order to qualify for government biddings, tenders and projects.
If you have a government contract for services- always check requirement for your public liability insurance. Normally it would be quite a big amount of money only due to the fact that government and government agencies prefer to play safe.
Lately there is a trend in insurance industry to move public liability insurance from $1,000,000 public liability insurance agreements to $2,000,000 reputable insurance companies even provide better terms and cheaper premiums for higher amounts. It can be explained by rising cost of everything and a policy with $1,000,000 does not offer the desired level of comfort and financial security.
Sixth – you must have public liability insurance if you conduct your business activity inside an individual property or your workplace have huge number of third party individuals coming in and out of your workplace. Good example is a workshop.
Other types of business that should have public liability insurance are businesses where alcohol is served or business dealing with harsh and dangerous chemicals, factories that accept public plant visits.
Seventh – you might discover that there are insurance companies who offer affordable public liability insurance by bundling it with other forms of insurances. For instance, typical public liability insurance becomes Broadform liability insurance once Employers Liability and Statutory Liability covers added to it. 99.9% a Broadform liability would be slightly dear but a lot more comprehensive and in the long run cheaper for your business.
Eights – once you have been in business for some time you need to understand the following:
- There is a contract for services which require you to have long period of insurance. The fact that you have retired does not take your and your responsibility of you. Example – you are a builder and the contract that you have to maintain your Public Liability insurance for 5 years for $10,000,000- that means you have to budget the cost of insurance not for a current year but also for the next 5 and if $10,000,000 outside of you normal scope of day to day business you might be better off by not taking the contract in the first place. Only due to the cost of the insurance policy for $10,000,000 for next 5 years.
Retire soon? What to know about Public Liability Insurance NZ?
- You have been in business for the last 40 years and thinking about retiring. You know that the business you have is based on your personality and cannot be sold as “on-going concern” meaning that once you have retired the business is going to wind off. Your insurer must be informed that you are going to retire from the next year and you have to request a “run off” insurance policy. “Run off” insurance policy means that even you have retired the “risks” or projects you have been working for the last few years are going to exist. This special agreement with your insurer is going to provide you with diminishing public liability insurance and if something goes wrong and you find liable you are yet covered.
With all of the above facts and information, you are surely confident now that you can tackle public liability insurance and know how much you need to have in your policy.
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