Business Assets Risk Advisory

Fire and natural disasters like floods, can occur at any time and without proper insurance cover, can put any business, out of business. We are experts in designing and advising on catastrophe asset insurance, including particular cover for Buildings, Stock and Plant & Machinery and other contents.

While South Africa is safe from natural disasters such as tsunamis, earthquakes, and volcanic eruptions, news headlines through the years have been filled with the disastrous effects of droughts, floods, fires, and epidemics. Households and businesses alike have struggled to recover from these damages and for many it has been a losing battle. Therefore, if you’re a business owner, business insurance in South Africa is a necessity, not a luxury.

Different businesses will be affected by different natural perils depending on their location. For example, coffee shop alongside one of the Cape Town beaches is more likely to be affected by a natural disaster involving the ocean than a coffee shop in one of the rural towns.

Also consider the nature of the business. While all businesses should have general insurance, such as fire insurance, other situations may warrant more particular insurance needs.

Buildings

It is essential to understand what your insurance policy defines a building as.

Usually, it is the actual structure with all fixtures and fitting and other named structures like driveways, gates, fences etc. – check your policy to ensure your building falls within the ambit of cover provided by your policy. Also, make sure you disclose non standard building construction. Examples of non standard building construction include thatch, wood, prefab etc. Please contact us if you are unsure.

The main events covered by commercial building policies are Fire and Storm.

Always check you have read the policy exclusions. An example of a risk that is excluded is “Wear and Tear” or any gradually operating cause.

The correct setting of your sum insured is crucial, to avoid Proportionate Underinsurance penalties applying at claim stage. Invariably, the sum insured must always represent the cost to rebuild, inclusive of VAT and all costs like professional fees, demolition etc. An annual professional evaluation of your building is prudent to ensure your sum insured is correct.

Stock & Raw Materials

A common definition of stock is “the goods or merchandise kept on the premises of a shop or warehouse and available for sale or distribution”. Raw materials are those assets, materials or substances used in the primary production or manufacturing of goods.

A key determinant is that the stock assets must be for sale or distribution purposes. All assets used in the production of stock or facilitation of stock would fall under Contents, Plant & Machinery etc. Commercial insurance policies often refer to stock as all Stock and raw materials in trade.

The main events covered by commercial Stock policies are Fire and Storm.

Always check you have read the policy exclusions under the Fire section. An example of a risk which is excluded is “Wear and Tear” or any gradually operating cause.

Again, the correct setting of your sum Stock insured is crucial, to avoid Proportionate Underinsurance penalties applying at claim stage.

Plant & Machinery and all other Contents

Essentially, the assets that remain, after you have insured your Buildings and Stock, are all the other Contents and Plant & Machinery.

The main events covered by commercial policies for Contents, Plant & Machinery are Fire and Storm.

Always check you have read the policy exclusions under the Fire section. An example of a risk which is excluded is “Wear and Tear” or any gradually operating cause.

The correct setting of your sum insured is crucial, to avoid Proportionate Underinsurance penalties applying at claim stage. Invariably, the sum insured must always represent the New Reinstatement/ Replacement cost of all the Contents and Plant and Machinery, inclusive of VAT and all costs like professional fees, demolition etc. An annual professional evaluation of this sum insured is prudent to ensure your sum insured is correct.

Essentially particular cover, including Fire and Theft, for assets found in an office environment, except for Computer Data Processing Equipment, which must be insured under Electronic Equipment.

This section of the policy looks to cover contents or furniture found in an office, including your landlord’s fixtures and fittings or for which you are responsible, other than electronic data processing equipment. Some examples may include desks, cabinets, dry walling, office chairs, office crockery etc.

The correct setting of your sum insured is crucial, to avoid Proportionate Underinsurance penalties applying at claim stage. Invariably, the sum insured must always represent the New Replacement Value of all the Office Contents, inclusive of VAT.

Electronic Equipment is key to virtually any business these days. Electronic Assets like servers, computers, routers etc. are absolutely essential for successful business operations. Wide cover is available to cover fire, theft, storm, accidental damage, plus a few other risks, like the cost to reinstate data and the costs to expedite rapid acquisitions of key electronic assets following a valid claim, to avoid potential turnover loss.

This section of the policy looks to cover electronic assets. Some examples include computers, scanners, servers and other similar equipment.

The correct setting of your sum insured is crucial, to avoid Proportionate Underinsurance penalties applying at claim stage. Invariably, the sum insured must always represent the New Replacement Value of all insured electronic equipment, inclusive of VAT.

Increase in Cost of Working is an often overlooked extension of cover under this section. This extension provides for the increased costs, up to the sum insured, to maintain operations following loss of key electronic assets.

Adequate disaster recovery planning plus insurance cover is the answer

There are, however, ways and means of protecting businesses from failing after both natural and man-made perils have effectively downed the IT infrastructure – adequate disaster recovery planning and business insurance that covers all electronic equipment.

With the recent transition to a 24/7 economy and the importance of IT as the hub of any business’s critical function, an effective plan to protect this data has become a priority and should go hand-in-glove with an efficient risk management strategy.

Today, businesses are increasingly more reliant on fax machines, computers, photocopiers, switchboards and even burglar alarms for their success, but when these technological aides are compromised by hackers, sabotage, lightning, theft or other perils, entire corporations can and will be brought to their knees, unless covered against such perils.

Eskom’s energy supply debacle an example of risk

In South Africa the vulnerability of electronic equipment was highlighted by Eskom’s supply debacle when power outages were the norm. Big businesses were outraged that this parastatal was unable to give sufficient due warning of these outages, thereby preventing a workable disaster recovery strategy. These kinds of risks are not going to disappear in a hurry and to remain competitive, businesses need to factor in the possibility of a data disaster and plan adequately for it.

It has been estimated that the big corporates spend between 2% and 4% of their entire IT budget on disaster recovery planning; a significant sum in anyone’s books. But a cheaper alternative is available through any reputable insurance company.

Corporate insurance covering electronic equipment generally protects the business against risks such as fire, wind, water, hail, snow, lighting, power surges, explosions, theft and accidental damage but will exclude wear and tear and the dreaded incidence of computer viruses.

Optional extensions to standard business insurance

Talk to us about optional extensions to the standard cover including:

• Increase in cost of working
• The Reinstatement of Data
• The Telkom Access Lines (e.g. ADSL line)
• Incompatibility cover

The term “All Risks” in a sense, essentially explains the covered offered. This is the widest available cover for assets and basically looks to cover all the accidental risks the assets is exposed to, on and away from the insured risk address, except for events excluded by the insurance company.

An insurance policy that covers all perils

An all risks insurance policy, be it business or personal, is essentially an insurance policy that covers all loss or damage to specified property, subject to the listed policy exceptions.

Some typical exclusions are wear & tear, mechanical/electrical breakdown, riot & strikes, inherent vice, employee/director dishonesty, detention/confiscation by authorities and theft from unattended vehicles – be sure to read your policy to ensure you aware of all the exclusions.

Away from the premises cover

Most insurance policies will restrict the place of loss to the premises only. An All Risks policy, however, is designed to cover your property on and away from the premises in terms of the items specified in the schedule – a big advantage indeed!

Typical items insured under All Risks, therefore, include portable property such as cell phones, laptops, projectors, iPods etc. Insurers will generally load the premium slightly as their risk exposure is wider.

Essentially insurance cover for commercial motor vehicles used for business purposes. Cover can range from Third Party cover only, Third Party-Fire-And-Theft cover and lastly, the widest and most common form of cover, Accident-Third Party-Fire-And-Theft (often termed Comprehensive).

Tailor-made motor insurance policies

Insurance companies in South Africa generally have dedicated policies for individual motor vehicles, as well as fleet insurance and other types of motor insurance. Ask us for advice on tailor-made insurance packages designed specifically for your individual business requirements.

Keep the broker or insurance company informed of any traffic violations

It is imperative to ensure that all designated drivers have valid driver’s licenses commensurate for the type of vehicle they drive and that any traffic violations or convictions occurring after the insurance policy was signed be reported to the insurance company or broker. Failure to do so may very well mean the business owner is not covered for loss or damage to the company car or even worse still, legal liabilities to third parties property as a result of the motor vehicle.

Optional extras

Apart from comprehensive cover, clients may choose optional extras, which may include:

• Insurance cover when travelling outside of South Africa’s borders.. This additional cover may include the cost of repatriation to South Africa, should the loss occur outside South Africa
• Special cover for 4×4 owners
• Car hire, up to a specified number of days, following a claim (accident or theft) to the insured vehicle. The insurers basically provide you a hired car, usually after 3 days
• Loss of Use cover, up to,a specified number of days, based on insurers paying you an amount per day as compensation (usually after 3 days), to enable your hire another commercial vehicle, following a claim to the insured vehicle
• Vehicle credit shortfall (“Top Up”) insurance cover, which covers the outstanding payments (beyond the specified policy indemnity) to the finance house
• Basic Excess Waiver
• Cover for factory and non-factory fitted extras e.g. canopies, tow bars, bull bars, mag wheels etc.