What is Business Interruption and why is it important? Would your business survive if it was damaged by a severe weather event, fire, flood or the cessation of a key supplier? How would you cover the cost of revenue and profits lost while you rebuild? These are all really important questions.
Business Interruption Insurance, sometimes called Business Income Insurance, can cover the revenue you would have earned if the disaster hadn’t happened. To help explain business interruption insurance, Steadfast have partnered with Kochie’s Business Builders to produce this short explainer video. https://vimeo.com/213959102
Who needs Business Interruption Insurance?
If you had to start again after an unexpected disruption, could you?
When a Melbourne solicitors office suffered serious flood damage after a major storm, the business was up and running again within two weeks. Such a quick recovery was made possible because the solicitors had a Business Interruption policy. Their policy provided them with a readily available lump sum to cover temporary relocation and other after loss costs until they were able to resume normal trading.
What is covered by Business Interruption Insurance?
- Business Interruption Insurance is designed to cover any loss of sales, less expenses not incurred, plus the increased cost of remaining open for business. Policies typically cover:
- Profits your business would have earned, based on previous financial statements
- Operating expenses, such as electricity, that continue even though your business activities have come to a halt or temporarily relocated
- Relocation costs for moving to, and operating from, a temporary location
- Training costs for operators of machinery replaced by the insurer
- Closure of your business premises due to government-ordered street closures or curfews related to a covered event
- Damage to the premises of one of your suppliers which has a negative flow on effect for your own business operations
Choosing the right cover
When disaster strikes, it can take months to get your business back on track.
When Michael’s office supplies showroom caught on fire at 11am on a Friday morning, the premises and all stock were completely destroyed. By the following Tuesday lunchtime, he banked his first weekly insurance payment. Many policies show weekly sums but don’t pay on a weekly basis. By selecting a policy with a weekly payment schedule, Michael could focus on rebuilding knowing that his cash flow would be maintained at its pre-interruption level, beginning within seven days of the disaster.
Defining your Business Interruption needs and sourcing the right cover for your business can be a confusing task. As Steadfast brokers, we understand the complexities involved and can advise you on what’s best for your business. We’ll look at your current cover and tailor a Business Interruption policy to suit your needs.