Right insurance means no tears over spilt milk

Farmer Freddy learns about business interruption insurance which covers income lost by a business due to a natural disaster.

Farmer Freddy is reading his Taranaki Daily News one morning and an article about the recent Maui pipeline leak catches his eye.

The article refers to business interruption insurance. It so happens that Pebbles pops in for a quick coffee just at that moment, so Freddy asks if she can explain how it works.

"Well Dad," Pebbles replies, "there are several types of business insurance which you should consider. First, there's material damage insurance, which is your standard insurance policy that protects your assets such as cowsheds, livestock, plant and other buildings against physical damage.

Second, there's liability insurance, which covers you for any liability you have to third parties for losses you cause them.

Third, there's business interruption insurance. This type of insurance covers the income lost by a business in the aftermath of a business interruption, like a natural disaster or like an incident such as the Maui pipeline leak."

"This sort of cover is particularly important for you Dad," Pebbles continues,"because as a dairy farmer, you are reliant on things like electricity for milking and running the vat.

Business interruption insurance, if you get the right policy, will also cover interruptions flowing from other properties - such as damage to a power station leaving your farm without electricity, or the inability of the dairy company to process your milk - both of which would force you into having to dump milk."

"My heart breaks when I see those farmers in the Waikato having to dump all that milk," says Freddy.

"If it happened to me, I'd want to make sure I could claim."

"That's right, Dad", says Pebbles. "And if a big natural disaster like an earthquake or volcanic eruption hit, it could be worse.

"It wouldn't just be dumped milk you would have to worry about. It could be months before the farm resumes making any revenue by the time the cowshed and other infrastructurewas back up and running."

"So any business interruption insurance policy should be OK, then?" asks Freddy.
"Not really, Dad," says Pebbles."You've got to make sure you understand the policy thoroughly so you know what events you are covered for, how much you are coveredf or, and how long the cover will last.

"Some of these policies will exclude losses caused by particular events, like the Maui pipeline leaking, so you may need to negotiate the terms of your cover carefully."
"If any part of the policy is not clear to you, discuss it with your broker. If you're still not happy, seek advice from your solicitor," advises Pebbles.

"Thanks, Pebbles" replies Freddy.

"I think I'll go down and have a chat with my insurance broker first thing on Monday morning, then."


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