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Do I need business interruption? | MIS FAQs

Many businesses are not sure if they need (or perhaps just don’t understand) business interruption insurance. In this post, we’ll try to explain business interruption insurance, and why your business may want to consider it.

What is business interruption insurance?

First of all, business interruption insurance can cover your business for loss of profits. Your business income may stop after an insured event or catastrophe, but your expenses continue! Often the interruption to your business can be costlier in the claims process than the cost of repairing the physical damage to your business property.

What can business interruption insurance cover?

Business interruption insurance can help to cover costs that will keep your business up and running, such as relocating to temporary premises, paying for overtime incurred in the process, or for the cost of additional/temporary staff, and hiring equipment (i.e. generators) that can help you open your doors for business again.

It can also cover advertising to communicate to your customers that you’ve moved or when you’ll be back in business. The idea of business interruption insurance is that it will help to return your business and its income back to where it was prior to the disruption.

What is indirection business interruption?

Business interruption can also be extended to include things that indirectly impact your business, such as a fire in another part of a shopping centre that prevents your customers from accessing your shop. Things like this could trigger your cover, to cover your loss of profits.

Think it couldn’t happen to you, or an event is unlikely? A Business SA survey of 260 businesses found that after the South Australia electricity blackout in September last year, most businesses did not have business interruption insurance, and of those who did, more than half did not have the right kind of cover for losses from the blackout. Business SA calculated the median loss for individual businesses across the state of $5,000.

Would your business survive a prolonged interruption?

CGU Insurance recently surveyed 500 small businesses and found that one in four would not survive if they had to close their doors for three months. But less than a quarter of those business owners surveyed actually had business interruption insurance.

Want some advice or a quote?

This information doesn’t take your personal or financial situation into account and may only be regarded as general advice. You should speak to us or your insurance broker before taking action. And, of course, always read the fine print (i.e. product disclosure statement) before purchasing any financial product.