by Alain Sayour, Gow Gates
Many companies make sure they have their building and contents insured for fire and accidental damage, but what about the disruption these events can cause to the businesses’ operations?
Does this sound familiar?
- “We can’t work at our office due to storm damage and the repairs that must be done”
- “It will take us a while to get up and going again because we had to move”
- “We have lost so much business and we won’t be able to pay our bills”
Below we take a look at what Business Interruption Insurance is and how it can help protect your businesses’ bottom line.
WHAT IS BUSINESS INTERRUPTION INSURANCE?
As the name suggests, Business Interruption Insurance covers the loss in gross profits caused by the interruption of your business from an insured event. It can help you pay ongoing costs of the business and protects profit margins until the business is back on its feet trading again at the same profit level as before the interruption.
The Insurance Council of Australia suggest that up to 70% of businesses fail if they did not insure, or fully insure, for business interruption following a significant loss such as fire or significant storm damage. For something that is a simple addition to even the most standard business policy, this statistic is quite confronting.
WHAT ELSE DOES BUSINESS INTERRUPTION INSURANCE COVER?
It can cover such things as wages for business owners, key staff and additional labour costs as well as ongoing expenses such as leases on equipment. Furthermore, it can also include cover for costs incurred to relocate the business including temporary hire of equipment and rent for additional premises. It can also cover costs incurred to subcontract out work to keep customers happy and ancillary charges such as freight, advertising and storage costs.
HOW LONG CAN I INSURE BUSINESS INTERRUPTION FOR?
The indemnity period needs to be accurately assessed. The indemnity period is the term used by insurance companies to refer to the length of time after an insured event the business thinks they might not be able to operate fully, as well as the length of time the business may require financial assistance to meet ongoing financial costs. A business that can relocate and recover quite easily might only need a short indemnity period, however a business that depends on a unique location or special equipment may take longer to get back to full trading capacity. Insurance companies generally tend to offer 3 months to 36 months indemnity periods.
HOW MUCH WILL IT COST?
The premium will increase the longer the indemnity period and the higher the sum insured is. Is it worth the expense? If you want to keep your business running, Yes. You would be surprised how affordable this protection can be.
HOW DO I WORK OUT WHAT SUM INSURED I NEED FOR MY BUSINESS INTERRUPTION?
The most comprehensive, safest option is to insure your gross annual income and select an indemnity period suitable for your particular business. Also it is important to consider the additional costs of working that you may require and how “portable” your business is – how quickly could you set up somewhere else and be running to pre-loss levels.
For more information about business interruption insurance and to get a quote, please contact Alain Sayour from Gow-Gates Insurance Brokers on 02 8267 9903 or nra@gowgates.com.au.
While the information is believed to be correct, no responsibility is accepted for any statements of opinion or any error or omission. The information set out is of a general nature and cannot be a substitute for professional financial or legal advice tailored to specific situations.
Gow-Gates Insurance Brokers Pty Ltd ABN 12 000 837 785 | AFSL 245432