Philip Holland Financial Independence www.financialindependence.co.nz

The devastation caused by the Canterbury earthquake is a sharp reminder that the risks of a natural disaster are very real.

So…would your business survive if an earthquake hit this area?

Recent insurance audits of local businesses highlighted to us that about one third of these businesses would have struggled to survive financially if an earthquake struck here.

Many businesses organise basic insurance covers when they start up. But as assets are acquired and the business grows, levels of cover are often not regularly reviewed and updated. It is vital that the cover in place is an accurate assessment of the costs of replacing assets. This includes such costs as demolition, labour and transport costs associated with the replacement which are often overlooked.

In the event of an earthquake, even if you have adequate cover for replacement of assets, without business interruption cover, your business stands to face a crippling loss. Cash is the life blood of business, and without business interruption cover, any cash reserves will quickly drain from the business.

Immediately there will be continuing costs such as wages and outstanding invoices to pay. There will also be the additional costs the business must face to carry on working.

After an earthquake these costs will continue for a significant period of time. Many businesses will not be aware that you can chose the period of time you are covered following a loss. Repairs and rebuilding, construction and fit-outs may take a significant period of time, with huge demands and limited resources. Some buildings will take years to re-construct.

You need to speak to your broker for a thorough assessment of the exposure your business has to these risks and this needs to be kept up to date through regular contact with your broker.

Having insurance cover is not enough. It is also advisable to have an emergency plan including an alternative place to operate from and a copy of staff contact details (including cell phone numbers), which should be stored away from the premises.

Philip Holland is managing director for the Financial Independence group, Tauranga's leading specialist insurance and mortgage advisers. For further information please contact an adviser at Financial Independence 07 578 4414 or email info@yourbroker.co.nz A Disclosure Statement is available free of charge on request.