Are you and your business protected from key areas of risk? Arm yourself with some professional advice from Builtin Insurance – New Zealand’s trade insurance experts.
At Builtin, we deal with thousands of tradies up and down the country, so we know insurance isn’t anybody’s favourite topic! While it’s not something you want to think about, it is something you need to have, and need to have properly arranged.
Having to replace an expensive asset that’s been stolen or damaged, or getting tied up in an expensive liability issue, can hammer a small business – not only financially; it can take an emotional toll on the contractor and their family too.
For larger firms, their exposure to risk is greater, as is their capacity to manage it. For company managers and directors, getting the right professional advice and having good risk management practices in place, including insurance cover, is a critical (and legal) duty.
In this article, we share some basic risk management questions, as well as the headlines of the key policies landscaping contractors need to consider.
What you need will vary according to your specific operations and business set up, but this should serve as a good overview to get you started.
Setting out your site - the framework
The first place to start is with a basic risk assessment of your business. We recommend breaking this down into chunks: physical assets, potential liability issues and income and financial risk.
We haven’t mentioned health and safety here, which is obviously a key area of risk, as this is well covered by other resources and systems, such as HazardCo and SiteSafe.
Also, while insurance can cover the legal costs of defending a health and safety prosecution – and pay reparations awarded to an injured party – insurance cannot legally pay fines under health and safety law.
Do you have an asset list? This is a register of all the tools and equipment your business owns. For accounting purposes, this is used for depreciation; for insurance purposes, it helps identify what is at risk.
Each item should be named, with its replacement value, serial number and date of purchase. There are plenty of phone apps to help (Hoist is one), and the Police also run SNAP.org.nz for this purpose. An asset register will also help
get any claim you make sorted quickly.
Equipment such as chainsaws, trimmers, mowers, chippers, ladders and wheelbarrows can quickly add up in value. Theft and damage can be insured, but not wear and tear or mechanical breakdown.
The main questions to ask yourself are:
What effect would the loss of a big chunk of my equipment have on my business? Both in terms of the cost of having to replace it and our ability to keep working and finish the jobs I have lined up.
Is it worth a monthly or annual insurance premium to cover this risk?
What are the issues you may face that could cause a third party (such as your client, a neighbour, local council, employee or other contractor) to hold you responsible for a loss they have suffered due to your actions (or inaction)?
Some examples may include:
Trees falling on fences, against buildings or onto driveways and cracking concrete.
Hitting underground services when digging.
Wood chips damaging vehicles, expensive linen hanging on the washing line, cladding.
Employees getting sick or injured on the job – eg, melanoma, stress, hearing loss, falls, back injury while bending or carrying heavy items, misuse of equipment (losing a finger or toe).
Employee disputes about discrimination, bullying, harassment, unfair dismissal, not being paid correctly (eg, holiday pay).
Health and safety failures that could result in injury and/or prosecution by WorkSafe.
Income & Financial Risk
If you unexpectedly became sick and couldn’t work for a period of time, what effect would this have on your business and your income level? ACC only covers accidental injury, not illness, so you can’t rely on it for things like cancer, heart disease, diabetes, mental illness, etc.
Secondly, what effect would it have on your business if the same happened to a key employee? If they were off work for a significant period of time, would you struggle to bring in new work, coordinate your teams, liaise with customers, or manage projects?
Finally, how dependent are you on being paid by contractors you work for? What would happen if they defaulted on payment or didn’t pay retentions they have held back?
Back Costing - Review Regularly
Once you have assessed your risk and arranged the right cover, you should make a time to review it regularly. A good time is around the annual renewal date of your insurance.
But any time your business makes a significant change should trigger a risk assessment. Have you taken on a bigger job, or a commercial job when you’ve been mostly residential? Are you working for a new customer? Have you bought new stuff, or taken on new staff?
With a good process, good advice and the right insurance and risk management programme in place, your business will be set up to weather any potential storms.
This article is not exhaustive and you should conduct your own assessment of your specific needs, perhaps along with an insurance/risk management professional adviser. There are other policies to cover different risks. Individual policy wordings from different insurers may vary. You should refer to the specific exclusions in your own policy wordings and discuss them with your insurance adviser if you are unsure.