Business Continuity Insurance
Protect your business income from unexpected disruptions. From $120/month.
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What is Business Continuity Insurance?
Business continuity insurance (also known as business interruption insurance) is essential protection that replaces lost income and covers ongoing expenses when your business operations are disrupted by fire, natural disaster, equipment breakdown, or other covered events.
Unlike general liability or property insurance that covers physical damage to your building or equipment, business continuity insurance specifically protects your cash flow and financial stability during the recovery period.
Key Point
Business continuity insurance bridges the gap between when disaster strikes and when you can resume normal operations. It keeps your business financially viable during periods when you can't generate revenue.
In New Zealand, businesses face unique risks including earthquakes, flooding, extreme weather events, and supply chain disruptions. Business continuity insurance provides a financial safety net that can mean the difference between survival and closure.
How It Works
When a covered event forces you to close or reduce operations, business continuity insurance:
What's Covered by Business Continuity Insurance?
Common Disruption Causes Covered
- Fire and smoke damage - Building fires, electrical fires, arson
- Natural disasters - Earthquakes, floods, storms, volcanic activity
- Equipment breakdown - Critical machinery failure, HVAC systems, refrigeration
- Supply chain disruptions - Key supplier failures, transport delays
- Utility failures - Power outages, water supply issues, telecommunications
- Forced closure by authorities - Public health orders, safety concerns, civil unrest
Why New Zealand Businesses Need Business Continuity Insurance
New Zealand businesses face unique operational risks that make business continuity insurance essential, not optional.
Natural Disaster Risk
New Zealand sits on the Pacific Ring of Fire, making earthquakes, volcanic activity, and extreme weather events a constant risk. The 2011 Christchurch earthquakes and 2016 Kaikoura earthquake demonstrated how quickly business operations can be disrupted.
Without business continuity insurance: Many businesses closed permanently because they couldn't afford to keep paying expenses while earning no revenue.
Supply Chain Vulnerability
New Zealand's geographic isolation means supply chains are more vulnerable to disruption. Port closures, shipping delays, or supplier failures can halt operations for weeks.
Without business continuity insurance: You're forced to use working capital or personal savings to stay afloat during disruptions.
Cash Flow Protection
Most New Zealand SMEs operate with tight cash flow margins. Even a 2-4 week disruption can deplete reserves and force difficult decisions about redundancies or closure.
With business continuity insurance: Fixed expenses are covered, allowing you to retain staff and maintain customer relationships during recovery.
Regulatory Compliance
Some industries require business continuity planning as part of regulatory compliance. Having insurance demonstrates financial resilience to regulators, lenders, and key clients.
Business benefit: Insurance strengthens tender applications and client confidence in your ability to deliver.
Statistics to Consider
- • 40% of businesses never reopen after a major disaster (FEMA data)
- • 25% of businesses that close due to disaster never reopen (Insurance Council NZ)
- • Average disruption period after natural disaster: 21-45 days
- • 60% of SMEs lack sufficient reserves to cover 30 days of zero revenue
Business Continuity Insurance Costs in New Zealand
Premiums are calculated based on your annual revenue, indemnity period, industry risk profile, and location.
| Annual Revenue | Indemnity Period | Monthly Premium |
|---|---|---|
| $250,000 | 12 months | $120 - $200 |
| $500,000 | 12 months | $215 - $350 |
| $1,000,000 | 12 months | $380 - $580 |
| $2,000,000 | 18 months | $680 - $1,100 |
| $5,000,000 | 24 months | $1,450 - $2,300 |
Factors Affecting Your Premium
Indemnity Period
The maximum period for which you'll be covered. Common periods: 12, 18, or 24 months. Longer periods cost more but provide better protection for complex recoveries.
Sum Insured
Based on your gross profit or revenue. Typically 50-100% of annual gross profit. Underinsurance can leave you exposed during major disruptions.
Industry Risk
Hospitality, manufacturing, and retail face higher premiums due to greater disruption frequency. Professional services typically pay lower rates.
Location
Wellington and Christchurch face higher earthquake risk premiums. Coastal areas may have higher flood risk premiums. Auckland CBD has higher fire risk.
Excess Period
The waiting period before coverage begins. Standard: 72 hours. Longer excess (7-14 days) reduces premiums but delays payout.
Premium Reduction Tips
- • Install fire suppression and detection systems (5-15% discount)
- • Implement business continuity planning (up to 10% discount)
- • Bundle with property insurance (10-20% multi-policy discount)
- • Choose longer excess periods (reduce premium by 20-30%)
- • Demonstrate robust backup systems and data recovery plans
Top Business Continuity Insurance Providers in New Zealand
Vero
New Zealand's largest commercial insurer with extensive business interruption expertise. Strong claims support and risk management resources.
Best for: Medium to large businesses, complex supply chains
NZI
Specialized commercial insurance with tailored business continuity solutions. Excellent industry-specific knowledge and fast claims processing.
Best for: Retail, hospitality, manufacturing sectors
Lumley
Competitive premiums for SMEs with flexible indemnity periods. Strong reputation for supporting businesses through major disruptions.
Best for: Small to medium businesses, service providers
FMG
Originally rural-focused but now serving all sectors. Excellent understanding of weather-related disruptions and supply chain issues.
Best for: Agriculture, rural businesses, food production
Chubb
Global insurer with sophisticated business interruption products. Ideal for complex businesses with international supply chains.
Best for: Large corporates, international operations
Allianz
Comprehensive business insurance packages with strong emphasis on risk prevention and business continuity planning support.
Best for: Professional services, technology companies
Real New Zealand Case Studies
Wellington Restaurant - Fire Damage
Business: 45-seat restaurant in Wellington CBD
Incident: Kitchen fire caused $180,000 damage, 8-week closure for repairs
Annual Revenue: $820,000
Insurance Coverage: 12-month indemnity, $410,000 sum insured
Insurance Payout
- • Lost revenue: $126,000
- • Employee wages (retained staff): $42,000
- • Rent during closure: $14,000
- • Extra marketing to win back customers: $8,500
- Total claim: $190,500
Outcome: Restaurant reopened successfully and retained 90% of customer base. Owner stated: "Without business continuity insurance, we would have lost everything. The coverage allowed us to keep paying our staff and maintain our reputation."
Auckland Manufacturing - Equipment Breakdown
Business: Plastics manufacturer, 25 employees
Incident: Critical injection molding machine failure, 6-week replacement wait
Annual Revenue: $3.2 million
Insurance Coverage: 18-month indemnity, $1.6M sum insured
Insurance Payout
- • Lost gross profit: $185,000
- • Employee wages: $68,000
- • Outsourcing costs to meet urgent orders: $42,000
- • Rental of temporary equipment: $28,000
- Total claim: $323,000
Outcome: Business maintained key client relationships and avoided redundancies. The outsourcing coverage was critical to retaining major contracts worth $1.2M annually.
Christchurch Retail - Earthquake Closure
Business: Specialty retail store, 8 employees
Incident: 2016 Kaikoura earthquake damaged building, forced 16-week closure
Annual Revenue: $680,000
Insurance Coverage: 24-month indemnity, $340,000 sum insured
Insurance Payout
- • Lost revenue: $208,000
- • Employee wages: $56,000
- • Temporary pop-up store lease: $18,000
- • Stock transfer and setup costs: $12,000
- • Extra advertising: $9,500
- Total claim: $303,500
Outcome: The temporary location coverage allowed the business to maintain presence during repairs. They reopened in original location with 85% of customers returning immediately.
How Business Continuity Insurance Claims Work
Report the Incident
Contact your insurer immediately when a disruption occurs. Provide details about the event, estimated duration, and potential financial impact. Most insurers have 24/7 claims lines.
Document Everything
Gather financial records showing historical revenue, current expenses, and projected losses. Keep receipts for all extra expenses incurred to minimize the disruption. Photos and assessor reports are essential.
Loss Assessment
Insurer will appoint a loss adjuster to calculate your claim. They'll review your financial records, assess the disruption cause, and determine coverage under your policy. This typically takes 2-4 weeks.
Interim Payments
Most insurers provide interim payments to cover immediate expenses while the full claim is assessed. These typically cover 40-60% of estimated loss within 2-3 weeks of lodging.
Final Settlement
Once operations resume, the insurer will finalize the claim based on actual losses incurred. This includes lost profits, continued expenses, and additional costs during the indemnity period.
Important Claim Requirements
- • Maintain accurate financial records (profit & loss statements, tax returns)
- • Take reasonable steps to minimize losses (duty to mitigate)
- • Don't dispose of damaged property before assessment
- • Keep detailed records of all disruption-related expenses
- • Notify insurer of any changes to estimated loss amount
Frequently Asked Questions
What's the difference between business continuity insurance and business interruption insurance?
They're the same product with different names. "Business interruption" is the traditional term, while "business continuity" is increasingly used to emphasize protecting ongoing operations rather than just covering losses.
Does business continuity insurance cover COVID-19 closures?
Most standard policies exclude pandemics and infectious diseases. Some insurers now offer pandemic extensions as optional add-ons, but these typically have sub-limits and specific requirements. Always check your policy wording.
How long does it take to receive a payout?
Interim payments typically arrive within 2-4 weeks of lodging a claim. Final settlement depends on disruption duration and complexity but usually occurs within 6-8 weeks of operations resuming. Keep detailed records to speed up the process.
Can I get business continuity insurance as a standalone policy?
Usually no. Business continuity insurance is typically bundled with property insurance because it covers losses arising from physical damage to property. Some insurers offer it with material damage coverage for specific equipment.
What's an indemnity period and how long should mine be?
The indemnity period is the maximum time you'll be covered after an incident. Consider how long it would realistically take to fully recover operations. Retail: 12 months. Manufacturing: 18-24 months. Service businesses: 12 months usually sufficient.
Does business continuity insurance cover loss of a key supplier?
Only if you have a "contingent business interruption" extension and the supplier suffers physical damage to their property. Standard policies don't cover suppliers simply going out of business or choosing not to supply you.
What happens if I'm underinsured?
Insurers apply "average" - reducing your payout proportionally. If you're insured for $500,000 but should be insured for $1,000,000 (50% underinsured), your claim will be reduced by 50%. Always review your sum insured annually.
Are there any exclusions I should know about?
Common exclusions: pandemics, war/terrorism (unless added), cyber attacks, gradual deterioration, pre-existing damage, voluntary closure, and losses from strikes. Read your policy schedule carefully and ask about exclusions specific to your industry.
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