Hospitality business insurance: why you could be risking your business

restaurant owner invests in insurance

Running a café, restaurant or bar is hard work. It’s long hours, lots of pressure, and a chance of failure.

And if you’re actively involved in the business, cooking, serving, hosting, making drinks, or just being there to manage your operations, chances are you’re not getting a lot of time to rest and reflect on your business.

Running a café, restaurant or bar is hard work. It’s long hours, lots of pressure, and a chance of failure.

And if you’re actively involved in the business, cooking, serving, hosting, making drinks, or just being there to manage your operations, chances are you’re not getting a lot of time to rest and reflect on your business.

And that could mean you’re letting little things slip through the gaps. Like having the right insurance.

Do you know whether you’re covered for all eventualities?

Your café, restaurant, or bar could be thriving, but it only takes one negative event to put you out of business for a day, a week, or for good. That’s what insurance is for; to cover your losses. But too many business owners believe they’re fully insured, only to find out that they’re not covered just when they need it the most.

This is a huge problem in New Zealand, which has the third-lowest penetration of insurance among 31 OECD countries.[1] In fact, most small businesses are underinsured, according to Insurance Council of New Zealand CEO Tim Grafton.[2]

It’s important to understand whether you’re covered for all the likely events you could experience, from fire and theft, to earthquakes and floods. However, have you also considered what would happen if a power outage meant your cool room stopped working and your produce spoiled? What about an extended power outage that meant you had to close your doors and lose income during your busiest trading time?

Do you know all the risks you face?

Managing risk is all part of good business management. So it’s essential for you to be aware of all the potential risks your business could face and the insurance options available. That’s the only way you can begin to develop a plan to handle these risks.

Some risks are remote; if your business doesn’t use or store temperature controlled products then you don’t need a Refrigerated Goods cover. Other risks are very real and need to be protected against. To decide which is which, it’s worth working with a risk advisor to create a risk matrix. That way, you can see what risks you face which are the most serious and determine the likely cost if the situation eventuates.

For example, if a risk is relatively likely to happen to your business but the cost of that event would be very low, then you may decide to self-insure. Conversely, if the potential cost were high, it could make more sense to seek specialist insurance to cover your business.

This way you can decide what factors to insure for and what policies will suit your business.

Have you updated your insurance lately?

A common reason for businesses to be underinsured is because their circumstances have changed but they haven’t revisited their insurance policies to make sure their coverage continues to match their needs.

You should update or at least review your insurance policies regularly. For example, if your business buys new assets or grows significantly, at the beginning of each financial year, and if your business moves premises. These are just three examples of when you should review your insurance. Any change in circumstance warrants a review with your advisor to make sure you don’t accidentally fall out of coverage.

Why work with an advisor?

No one knows your business as well as you do. And no one knows risk management and insurance options like a professional advisor. Together, you can make a formidable team when it comes to identifying and managing the unique risks that your business faces.

 

[1] https://www.fsc.org.nz/site/fsc/files/Insurance%20Gap%20Files%202013/Massey-FSCReportFinal-20%207%2012.pdf

[2] https://www.business.govt.nz/news/are-you-under-insured/