Business Interruption

From your family and employees to customers and suppliers, there are a lot of people who are dependent on your business. Given this, have you ever considered what would happen if your were unable to operate due to crucial assets being damaged or destroyed by a major event like fire, flood, significant storm damage or an earthquake?

A study by the Insurance Council of Australia suggests that of the 40% of businesses that don’t have adequate insurance cover, around 90% of them do not survive a major loss.

Business interruption insurance covers the shortfall in gross profits caused by an interruption to your business should a disaster or another type of insured event forces you to close your doors, whether for a short or an extended period of time. It effectively returns your business to the same financial position it was in before the event occurred, allowing the quickest possible resumption of normal business.

It’s important to remember not all Business Interruption policy wording is the same, and inadequate cover could be crippling to your business. There are a variety of wordings and basis of settlement from Gross Profit, Gross Revenue, and Instant Profits. In addition to deciding the best basis of cover for your business there are other considerations such as:

  • Indemnity Period – How long do you need the cover for? How long will it take your business to get back to pre-loss trading figures?
  • Claims Preparation Fees – How much is going to be sufficient for your business?
  • Additional Increased Costs of Working – What additional expenses will you incur to prevent your business from declining or losing customers or suppliers? How much cover will you need?
  • Payroll – Do you insure it, how much of it, and for what period of time?
  • What happens in the event of a claim if your business is subject to seasonal fluctuations or economic cycles?
  • Are you covered when your business is in growth mode?
  • How do the terms and conditions of your lease impact on your cover?
  • What happens if one of your customers or suppliers suffers damage from a significant peril and your business suffers as a result? Would you be covered?
  • Average (also known as under-insurance) – What is it and how can you avoid its potentially devastating affects?
  • Uninsured Working Expenses – Make sure you’re not paying for un-necessary cover that relates to expenses that would not exist in the event of a claim.

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