Glossary

Here are some commonly used insurance terms with explanations so you can a get better understanding.

Every business faces different types of risks. In preparing an Insurance Programme, you need to consider what risks your business is exposed to, and then decide which of those risks you can manage yourself, and which risks will require insurance.

This glossary covers most commercial insurance policies available on the market. Each section provides a brief summary of the cover, the items normally insured and some of the optional extensions available .

This glossary may serve as a useful tool in the preliminary stages of a risk review. In reviewing your insurance arrangements you must always remember your Duty of Disclosure, as failure to provide such information to the Insurer could jeopardise any future claim. Simply click on the term you are interested to find out more.

INDEX /simply click on the term below to get its full explanation/
ASSETS	COVERING
MATERIAL DAMAGE	Accidental physical loss or damage to buildings, plant and contents
BUSINESS INTERRUPTION	Loss of turnover following an insured risk eg: a fire
COMPUTERS	Damage to computers including additional costs to reinstate data
MOTOR VEHICLES	Loss or damage to vehicles used for commercial purposes.
LIABILITIES	COVERING
PUBLIC LIABILIITY	Liability for accidents happening in connection with occupation
STATUTORY and EMPLOYER'S LIABILITY	Fines, penalties and defence costs for breach of statute/regulation Liability for personal injury to employees (not covered by ACC)
PROFESSIONAL INDEMNIITY LIABILITY	Liability for design, consultancy or professional advice
DIRECTORS and OFFICERS	Personal liability of directors and officers of a company
EMPLOYMENT DISPUTES	Costs incurred in defending and/or settling an employment dispute.
FINANCIAL	COVERING
FIDELITY	Theft of money or goods by employees
INCOME PROTECTION	Loss of income following personal injury or illness
KEY PERSON	Loss of income following personal injury or illness for a specific employees
MEDICAL	Lump sum payment for the death of a partner or employee Costs for surgery, treatment and private medical care
TRADE CREDIT	Bad debts
OTHER COVERS	COVERING
MACHINERY BREAKDOWN	Breakdown of machinery and costs involved to repair or to replace
MACHINERY PROFITS	Reduction in turnover after a key piece of plant breaks down
MARINE CARGO	Transit of property imports/exports and/or within New Zealand .
CONTRACT WORKS	Buildings or projects during the course of construction
CORPORATE TRAVEL	Business and leisure travel worldwide for employees and family

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MATERIAL DAMAGE
COVERING	Accidental physical loss or damage to buildings plant and contents.
CLAIM EXAMPLES	eg: a fire destroys the building and its contents eg: burglary of stock and tools from the premises.
ITEMS INSURED	Commercial Building(s) Furniture, Plant, Equipment and Other Contents Stock and Materials In Trade Work In Progress Leasehold Improvements Money cash and negotiable securities.
OPTIONAL EXTENSIONS	- Replacement cover for building - Replacement cover for plant and contents - Capital additions to buildings and/or plant during the year - Cover for tools and portable equipment anywhere in NZ - Earthquake and Geothermal risks - Transit of stock and other items anywhere in NZ - Loss of refrigerated goods - Seasonal increase of stock (eg: Christmas) - Employees personal effects (not otherwise insured).

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BUSINESS INTERRUPTION
COVERING	Loss of turnover following an insured risk eg: a fire.
CLAIM EXAMPLES	eg: after a major fire the turnover is reduced to only 10% of the amount prior to the fire - business is unable to meet fixed costs such as wages, mortgage etc.
ITEMS INSURED	Annual Insured Gross Profit Additional increased costs of working Reinstatement of business records Claim preparation costs Unrecoverable book debts Loss of rental income and overhead costs.
OPTIONAL EXTENSIONS	- Earthquake and Geothermal risks - Options for Indemnity Period (cover period) from 3 months to 24 months following a fire or other insured loss - Damage at major customers or suppliers premises - Prevention of access to the premises - Interruption of power, gas or telecommunications - A death or disease at the premises forcing closure.

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COMPUTERS
COVERING	Damage to Computers including additional costs.
CLAIM EXAMPLES	eg: a major power surge damages the server requiring the replacement of hardware, labour, and reinstatement of lost data.
ITEMS INSURED	Computer Hardware and Other Electronic Equipment Reinstatement Of Data Additional Increased costs of working.
OPTIONAL EXTENSIONS	- Cover for laptops and portable equipment anywhere in New Zealand - Earthquake and Geothermal risks - Express freight and overtime costs.

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MOTOR VEHICLES
COVERING	Loss or damage to vehicles used for commercial purposes.
CLAIM EXAMPLES	eg: vehicle involved in nose to tail accident at intersection eg: vehicle stolen from yard eg: broken windscreen.
ITEMS INSURED	Section 1 : Cars, vans, trucks and other vehicles (market value) Section 2 : Legal liability for accidents.
OPTIONAL EXTENSIONS	- Goods in Transit - Additions and Deletions Clause (automatic annual cover) - Cover for loss of use (ie: rental vehicle costs) after an accident. - Automatic cover for rental vehicles (you hire) - Cover employees' vehicles if used for the business - Invalidation cover (if an employee breaches a policy condition).

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PUBLIC LIABILITY
COVERING	Liability for accidents happening in connection with occupation.
CLAIM EXAMPLES	eg: an electrician puts his foot through the ceiling eg: a painter over-sprays paint onto several vehicles.
ITEMS INSURED	General Indemnity for accidents Liability for products sold or supplied Tenants Liability Property Owners Liability.
OPTIONAL EXTENSIONS	- Service and repair of motor vehicles - Cover for work on watercraft or aircraft - Forest and Rural Fires Act cover - Punitive and exemplary damages awarded by a court - Vibration and/or removal of support - Bailee Liability covering custody of other's property.

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STATUTORY LIABILITIES
COVERING	Fines, penalties and defence costs for breach of statute/regulation.
CLAIM EXAMPLES	eg: an OSH prosecution after a workplace accident eg: a contractor is fined under Resource rv1anagement Act for polluting a small stream.
ITEMS INSURED	Health and Safety in Employment Act (1992) Resource Management Act (1992) Building Act (1991) Consumer Guarantees Act (1993) Fair Trading Act (1986).
OPTIONAL EXTENSIONS	- Cover for ALL other statutes and regulations - Advancement of defence costs - Retroactive liability - Compensation for court appearances - Insured chooses own defence counsel.

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EMPLOYERS LIABILITY
COVERING	Liability for personal injury to employees where there is no cover under ACe.
CLAIM EXAMPLES	eg: mental stress or trauma suffered at work eg: effects of passive smoking in the workplace.
ITEMS INSURED	Limit of liability for civil suits including cover for defence costs and any settlements.
OPTIONAL EXTENSIONS	- Retroactive liability.

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PROFESSIONAL INDEMNITY
COVERING	Liability for errors or omissions with design or professional advice.
CLAIM EXAMPLES	eg: a product designed by the company fails due to a design fault, and causes damage to other property eg: A client acts on advice you have given (and charged for) and suffers a financial loss for which they hold you liable.
ITEMS INSURED	Limit of liability for civil suits including cover for defence costs and any settlements.
OPTIONAL EXTENSIONS	- Retroactive liability - Liability for lost documents - Automatic reinstatement of sum insured (if you have a claim) - Cover for Libel and Slander - Cover for fraud or dishonesty of employees - Compensation for court appearances - Automatic cover for retired partners or principals.

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DIRECTORS and OFFICERS LIABILITY
COVERING	Personal liability of directors or officers for mismanagement or breach of professional duty.
CLAIM EXAMPLES	eg: a shareholder sues the directors for poor management decisions culminating in a major drop in company's share price eg: A major client of the company sues the directors and CEO as joint defendants with the company itself, for failure to meet a valuable export order.
ITEMS INSURED	Limit of liability for civil suits including cover for defence costs and any settlements.
OPTIONAL EXTENSIONS	- Retroactive liability - Outside Directorships (in connection with the company) - Automatic reinstatement of sum insured (if you have a claim) - Insured chooses own defence counsel - Insured vs. Insured (directors suing each other) - Compensation for court appearances - Advancement of defence costs - Continuous annual cover.

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EMPLOYMENT DISPUTES
COVERING	Costs incurred in defending and/or settling an employment dispute
CLAIM EXAMPLES	eg: an employee alleges sexual harassment in the workplace eg: an employee lodges a personal grievance claim against the employer for unfair dismissal. Court rules for the employee and awards costs totaling over $20,000.
ITEMS INSURED	Limit of liability for civil suits including cover for defence costs and any settlements.
OPTIONAL EXTENSIONS	Retroactive liability - Liability for lost documents.

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FIDELITY
COVERING	Theft of money or goods by employees.
CLAIM EXAMPLES	eg: it is discovered that an employee has been taking small amounts of cash from the business for several years. The cumulative total now amounts to over $12,000 !
ITEMS INSURED	All Employees or ... Nominated Employees/Positions.
OPTIONAL EXTENSIONS	- Cover for social club funds - Cover for temporary staff - Cover for ex-employees (up to 30 days after termination).

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INCOME PROTECTION
COVERING	Loss of income following personal injury or illness.
CLAIM EXAMPLES	eg: a plumber breaks his leg during a rugby game and is unable to work for three weeks eg: a self employed accountant suffers a heart attack and cannot work for several months, and even then only part-time eg: an electrician falls off roof and is off work for a month.
ITEMS INSURED	75% of Annual Pre-Tax Earnings (Indemnity Option - Taxable) or ... 55% of Annual Pre-Tax Earnings (Agreed Value Option - Non Taxable).
OPTIONAL EXTENSIONS	- Lump sum benefit if death results from an Accident - Lump sum benefit if you are permanently disabled - Lump sum benefit if suffer a critical illness - Cover for Locum or replacement (100%) - Cover for Business Overheads (100%) - Waiver of future premiums if you are unable to work.

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KEY PERSON
COVERING	Lump sum payment for the death of a partner or employee
CLAIM EXAMPLES	eg: A partner in the company dies suddenly from a heart attack, leaving the remaining partner with the job of running the company and finding a way to buy out the deceased partner's interest eg: A key employee responsible for some of the company's biggest contracts, dies suddenly and the company suffers financially as a direct result.
ITEMS INSURED	$$ Agreed Value on Shares (Partnership Protection) or ... $$ Fixed Lump Sum (Key Man Protection).
OPTIONAL EXTENSIONS	- Lump sum benefit if you are permanently disabled - Lump sum benefit if suffer a critical illness - Waiver of future premiums if you are unable to work.

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MEDICAL
COVERING	Costs for surgery, treatment and private medical care.
CLAIM EXAMPLES	eg: An employee is diagnosed with a serious liver complaint requIring immediate surgery and prolonged medical treatment subsequently eg: A director suffers a heart attack and requires immediate hospitalisation and the very best medical and post-operative care totaling over $35,000.
ITEMS INSURED	Hospital Bills and Specialist Fees and/or ... GP Charges and Prescription Costs.
OPTIONAL EXTENSIONS	- Cover for pre-existing medical conditions - Cover for dental work - Optional plans ranging from 50% to 100% cover.

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TRADE CREDIT
COVERING	Bad Debts
CLAIM EXAMPLES	eg: A major client defaults on the payment of a large account and falls into receivership. The company loses over $50,000.
ITEMS INSURED	Total Debtors or ... Specified Trade Debts.
OPTIONAL EXTENSIONS	- See policy

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MACHINERY BREAKDOWN
COVERING	Breakdown of machinery and costs involved to repair or to replace.
CLAIM EXAMPLES	eg: an expensive lathe throws a bearing, which causes the machine to grind to a halt. The damage caused by the forced stoppage is major and requires the air freighting of parts from Germany eg: a boiler thermostat fails, resulting in the boiler reaching critical temperatures and finally exploding.
ITEMS INSURED	Replacement cost of listed machinery.
OPTIONAL EXTENSIONS	- Overseas airfreight charges - Expediting expenses - Boiler and Pressure Vessel extension.

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MACHINERY PROFITS
COVERING	Reduction in turnover after a key piece of plant breaks down.
CLAIM EXAMPLES	eg: following a major breakdown of the main lathe in an engineering shop, the business is unable to produce any product for a period of four weeks until the machine is fixed and operational once again. The cash flow of the business is severely affected.
ITEMS INSURED	Annual Insured Gross Profit Additional increased costs of working Claim preparation costs.
OPTIONAL EXTENSIONS	Blanket cover (all plant) - Options for Indemnity Period (cover period) from 2 weeks to 6 months following a breakdown.

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MARINE CARGO
COVERING	Transit of property imports/exports and/or within New Zealand.
CLAIM EXAMPLES	eg: an export consignment of fruit is heat damaged on arrival in Japan. 50% of consignment condemned at a cost of ~;20,000 eg: a container is dropped on the wharf in Auckland, and some goods are broken eg: a carrier truck runs off the road between Auckland and Hamilton, and $5,000 worth of delivery goods are damaged.
ITEMS INSURED	Value of consignment(s) Increased costs on consignment (eg: 10%) Freight Insurance.
OPTIONAL EXTENSIONS	- War - Strikes and actions of locked out workers - Extended conditions for refrigerated goods - Liability for carriage of other peoples goods (Carriers Act) - Annual (Blanket Cover) policy option.

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CONTRACT WORKS
COVERING	Buildings or projects during the course of construction.
CLAIM EXAMPLES	eg: a building under construction is partially destroyed in a fire eg: a retaining wall on a sub-division collapses after heavy rain.
ITEMS INSURED	Contract Price (excluding GST) Increased costs during period of construction Escalation of costs during period of reconstruction Architects, Engineers and Professional Fees Demolition and removal of debris Materials supplied by the contract principal Contractors plant and equipment (including huts etc.) Existing buildings or property under your custody or control.
OPTIONAL EXTENSIONS	- Goods and materials in temporary storage - Transit of materials to and from the contract site - Overseas airfreight charges - Earthquake and Geothermal risks - Public Liability risks (if not insured separately) - Property under your custody or control - Expediting expenses - Annual (Blanket Cover) policy option.

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CORPORATE TRAVEL
COVERING	Business and leisure travel worldwide by employees and family.
CLAIM EXAMPLES	eg: an employee loses his laptop and briefcase in a taxi in Sydney eg: the daughter of a director cuts her foot on coral in Fiji and must be airlifted back to the mainland to receive medical treatment.
ITEMS INSURED	Medical Expenses Additional Expenses Baggage and Personal Effects Unauthorised use of Travel Documents Replacement Staff Emergency Alternative Travel Rental Vehicle Costs (Excess) Personal Accident Personal Liability.
OPTIONAL EXTENSIONS	- Kidnap and Ransom - Pre-Existing Medical Conditions - War and Civil Risks - Unlicensed Air Travel.

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DUTY OF DISCLOSURE

You have an ongoing duty to inform the Insurer of any information, which would affect their decision to insure you or set the terms of the policy. In this regard, you should inform the Insurer if there is any change in circumstances and in particular disclose information such as : ..
- any losses not reported to the Insurer
- any convictions or criminal offences
- unoccupied buildings or premises
- operation of hazardous plant or stock
- a change in financial circumstances for the company or its directors
- a change in operations involving different processes, products etc.

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