Get your cover right before it's too late

From vehicles, trailers and tools, to health and income, knowing how your insurance works – and what each policy actually covers – can make all the difference when something goes wrong, writes Construction Risk Expert Ben

Generally, if something is road registered or mechanically propelled on wheels, it should be insured on a vehicle policy. This includes trailers. There are exceptions for heavy equipment, which may need specialist cover.

Most commercial vehicle and contractors’ plant and equipment insurance policies cover the ‘market value’ or ‘present value’ of the vehicle. This means the value of the vehicle at the time of the loss after taking its age and condition into account.

Market values can be worked out by looking at the prices of comparable vehicles on online auction sites, speaking to your local dealer or by obtaining a professional valuation.

If there is a total loss claim, the insurer will obtain an independent valuation and use that as the basis for settling the claim. You can request additional valuations if you are not happy with their one. This can be the case if a vehicle is rare or has been modified.

Some vehicle policies (such as Builtin’s) will cover the market value regardless of the ’sum insured’ noted on the policy for that vehicle, while others will only cover up to the lower of either the sum insured or the market value.

In those cases, having a sum insured lower than the market value may result in a lower premium (as the premium is based on the sum insured) – but, if you have a total loss, your settlement from the insurer won’t be enough to buy a similar replacement vehicle.

You can also request an ‘agreed value’, where the insurer will pay out the amount shown on the policy. Typically, they will require a written valuation before providing agreed value cover on commercial vehicles.

The policy may also include fine print that says the cover will revert to market value, if the agreed value is more than 20% above the market value at the time of the loss.

Mobile plant, tools, equipment

Items that aren’t mechanically propelled on wheels can be insured for their ‘replacement value’. This means the amount it would cost to replace it with a new one, regardless of its age or condition. For this type of cover, your sum insured needs to be the total replacement value of all the insured items with no depreciation taken into account. Higher-value items may need to be individually listed, while smaller ones can be grouped as unspecified.

Some policies may only provide replacement value cover on items that are less than two years old. Others (like Builtin’s) will cover them for full replacement, regardless of how old they are. Insurers expect you to insure your full replacement value.

Trailers are road registered so can’t be insured under this type of policy. Nor can ride-on or self-propelled lawnmowers.

Leased equipment

Leased or hired equipment must be insured, either through a damage waiver from the hire company, automatic cover under a vehicle policy extension, or by adding a hired plant extension to your existing policy. Landscapers who regularly hire or lease equipment will generally find the third option the best and most cost effective.

Stock

Stock is covered at cost price, not retail.

Your biggest asset is you!

While it’s key to have all your assets covered, one important and often overlooked consideration is what support you have in place if you need time off the tools due to illness or injury. This is where health insurance and income protection insurance can help. However, knowing the difference between the two is key.

Income protection

Income protection insurance provides regular monthly payments to replace your income if you’re unable to work due to illness or injury.

Doesn't ACC do that?

ACC does a similar thing but for accidents only – and only up a maximum gross weekly compensation of $2,100.68. As landscapers are more likely to be off work through illness than accidental injury, income protection is often a better option than just relying on ACC.

Self-employed people can also dial down their ACC cover and put the saving towards income protection insurance, getting broader cover, often for a similar total cost.

Health insurance

Health insurance covers the cost of treatment for a health or medical issue. Doesn’t our public health system do that? Yes it does. However, health insurance can help you get faster access to treatment through the private system. It can also reduce the cost of private treatment for certain conditions.

So, what should I do?

As both types of insurance provide different cover, you may want to have them both.

If you only have income protection, you must rely on the public health system for treatment if you get sick; however, you would receive regular payments to replace your income until you could return to work.

If you only have health insurance and you get sick, then you may receive treatment sooner but would need to rely on disability income support from WINZ (currently just over $65 a week) if you were unable to work and had no other sources of income.

Ultimately, speaking to an experienced adviser before you make this decision is the right way to go.

In a nutshell

Market/present value is different from your book value and working it out is different than just applying depreciation.

Take the time each year to review your sums insured and adjust them as needed. Mobile plant and equipment can be insured for replacement value in some cases, but if it is mechanically propelled on wheels it needs to be on a vehicle or contractors, plant and equipment policy, which are both market value policies.

While they seem similar, there’s a big difference between health and income protection insurance. Builtin Insurance highlights the differences to help you decide what you should spend your money on.

It’s not uncommon for people to confuse these two types of insurance and think that they offer similar cover. But they don’t!

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Builtin are New Zealand’s Trade Insurance Experts.

For more information visit builtininsurance. co.nz, email Ben Rickard at ben@builtin.co.nz or call him on 0800 BUILTIN.