If you’re a business owner, then you’ve probably tuned in to the fact that contents insurance for burglary, extreme weather events and accidental damage is a necessity for protecting your company’s assets from the unexpected. But, if a flood struck your premises, not only would it damage your contents, but it could also cease operations from your workplace. You’re likely to get help paying for damages through your content’s insurance, but what about the loss of earnings incurred? That’s where business interruption insurance comes in handy.
If you and your employees are unable to work, events can impact much more than your physical assets. Business Interruption (BI) insurance covers the loss of gross profit caused by the interruption of your business from an insured event. BI can help you pay ongoing costs of the business, such as wages and rent, as well as protecting profit margins until the business is back on its feet and trading again.
Who needs business interruption insurance?
Answering one simple question can help you decide whether BI Insurance is right for you: Would substantial damage to your business property or physical assets affect your ability to trade for a continued period? If your business holds large quantities of stock or relies heavily on machinery or tools, then you’re probably more susceptible to loss of earnings than a freelance graphic designer who relies only on a laptop to work.
In Australia, business interruption insurance is not a legal requirement, so it’s up to each business owner to assess its suitability for themselves. By taking a look at your risks and vulnerability to unexpected events, you can decide whether it’s worth protecting your income with BI insurance. If an extreme weather event or fire would substantially impact your ability to trade, then you should consider protecting your business and livelihood with this insurance.
What else does business interruption insurance cover?
The ultimate purpose of business interruption insurance is to get you back to business as usual, as soon as possible. In a nutshell, business interruption cover replaces business income that has been lost in a disaster or event. The event could be, for example, a fire or severe weather damage.
Also, BI can cover wages for business owners, employees and some ongoing expenses such as rent or equipment leasing. Another huge lifesaver is that it can cover costs incurred to relocate the business as a result of displacement, which can involve temporary hires or rent on additional premises.
What doesn’t business interruption insurance cover?
Like many insurance policies, BI cover will have its exclusions depending on your policy. There are a few general exclusions that BI will not cover, including:
- a loss of gross profit caused by a downturn in trading conditions
- your personal, future financial losses if you decide to close your business after a major loss
- bankruptcy or insolvency, and
- a loss of revenue caused by intentional (non-accidental) damage.
Your cover will be subject to under-insurance conditions, so you need to make sure that you insure for 100% of your insurable gross profit, otherwise it won’t be covered. Consulting with an expert, like the team here at MIS, can help you avoid under-insurance.
Insurance you can rely on
Current legal battles over business interruption cover for COVID-19 has shined a light on the importance of comprehensive and clear policies. At Managed Insurance Solutions, we work closely with clients to give you insurance policies that you can trust, understand and rely on! So, whether you’re an accountant, tradie, retailer, professional recreational activities provider or beauty salon owner, we won’t leave you up the river without a paddle!
Contact us today for more information regarding business interruption insurance, or to get a free quote.
General advice warning
The information above may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information.
Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.