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Early childhood business insurance

Client advisory: Covid-19 and your early childhood centre insurance  - May 2020

Last updated:15 May 2020

Under alert level 2 the Government announced that early learning services can safely begin operating from Monday 18 May 2020. 

We wanted to update you on what this means for your centre’s insurance cover. This advisory aims to provide answers to the most common questions about the policy.

Policy response during different alert levels

Alert level 2

Insurance does not respond in alert level 2 as services are able to operate to their full licence numbers providing they can continue to meet public health measures around personal hygiene and contact tracing. 

Public health control measures

Public health officials have advised that early learning services are safe to be open at alert level 2, if appropriate public health control measures are put in place. Specific measures to be taken in early learning services include:

  • Parents are asked to keep any sick children at home. If a sick child comes to the service, or shows symptoms, services will send them home. 
  • Indoor temperature needs to be set at a minimum of 18 degrees Celsius. This minimum must be met. 
  • Young children require a lot of physical support and it is not possible to explain or maintain a physical distance between young children given the age of the children and set up of centres. This means good hygiene practices are even more important.
  • There does not need to be a measurable physical distance between children or children and staff.  Where possible, adults should keep 1 metre distance between themselves.
  • Ensure all children regularly wash and dry their hands.
  • Ensure hand sanitiser is available but teachers/staff supervise its location and use in order to avoid a child accidentally drinking it.
  • Ensure that children have their own food containers and do not give and take food to and from each other. Food can be supplied in accordance with public health guidance.
  • Outdoor play areas can be used, including sandpits, but children must wash their hands after use.
  • Disinfect and clean all surfaces daily.
  • Contact tracing registers must be in place.

Alert level 3

We can confirm that insurers have agreed that the policy will respond at Level 3 for lost fee income where parents keep their children at home following Government guidelines for level 3.

What the policy covers 

BI12 Infectious Disease

This insurance covers loss directly resulting from interruption to or interference with the business in consequence of action taken by a lawfully constituted civil authority following the outbreak of any infectious notifiable disease under the Health Act 1956 or the Biosecurity Act 1993, or their amendments, resulting in the ordered closure of the premises.

The policy covers loss of parents' fees less expenses saved during the closure period. The policy cap is 25% of annual turnover stated in the policy schedule up to a maximum of $250,000 per site.

The policy would also pay any shortfall of Government bulk funding if there were any claw backs from the closure period.

Claims payments

The progress payment is an initial cash flow payment and there will be top-ups in most cases; the final calculation will be for lost revenue (parents' fees and WINZ) less saved expenses (including rent rebate if applicable).

The Cash Flow Model guide on the ECC website illustrates how the insurance claims payments are calculated. To access this login to the ECC website, go to COVID-19 resources for ECC members and download the ‘Insurance Assessment and Cash flow Model’.

Rent rebates

Depending on terms of the centre’s lease, the centre may have the right to obtain a rent abatement from the landlord during closure of the centre. Any such rent abatement will be treated as a saved expense as part of any claim. To avoid a potential shortfall in your claim, any rent abatement negotiations need to be authorised by the assessor prior to agreeing this with your landlord. 

Wage subsidies

We do not take the subsidy into account when calculating your insurance claim. The wage subsidy is a matter between you and Work and Income, in accordance with the signed declaration in accepting a government payment.  

Any queries about wage subsidies should be directed to your accountant.

We’re here to help

One of our core responsibilities as a broker is to ensure you have all the information you need to make informed decisions about the risks your Early Childhood Centre faces. With the effects of Covid-19 being felt in a number of ways by our clients across the country, we wanted to share some proactive advice to help you protect what’s important during this difficult and unprecedented time.

We hope you find the information above helpful, if you have any questions or if you would like to speak to us regarding your insurance please talk to your broker

Further information