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Business Interruption Cover

Most small business owners like to prepare for unexpected events by insuring their physical assets, such as their premises, contents, stock and equipment. But have you thought about what would happen if you had to shut your doors for a few days, weeks or even months due to an insurable event, like fire, storm or theft?

Would your business survive? How would you continue to pay for things like rent, utilities, staff wages and other business expenses?

Business Interruption insurance covers you for the loss of income and the increased costs of running your business as a result of damage by events covered in your policy. It is an important form of cover for small business owners, as the slightest hiccup can send your business into turmoil and cause chaos to your finances.

It is important to note that Business Interruption cover is available an additional cover option when you take out a Business Insurance policy.

Did you know?

When a catastrophe occurs it is often the interference to trading capabilities, and not the event itself, that has the real potential to bring the business to its knees. Business interruption insurance is designed to provide compensation for the financial impact of these events, and help place your business in the same financial position it was before the chaos.

What’s typically covered?

  • Loss of turnover due to damage to your own premises – to help pay for ongoing operating expenses
  • Business relocation costs
  • Training costs for operators of replacement machinery
  • Loss of turnover due to Damage to a supplier’s premises – which causes interruption to your business operations

What’s typically NOT covered?

  • Undocumented income
  • Losses due to labour strikes and changes in legislation
  • Losses beyond the indemnity period
  • Non-covered damages and voluntary closures

Things to consider

  1. Do you have enough capital to meet your financial obligations if an unforeseen event haltered your business operations? Consider how much it would cost to continue paying for things like wages, loan repayments, rent and other bills.
  2. How long could you potentially be out of business and how long could you continue to pay for these expenses? This will help you to determine the ‘indemnity period’, aka the period of time you wish to insure your business for loss of turnover. Small business owners often underestimate how long it can take to get their business back up and running following a major event.
  3. Business Interruption insurance should be just one part of your wider disaster recovery plan – a plan that should include both a broader insurance package and a clear guideline for how your business would react and recover after a disaster event.

Need a real-life scenario?

Watch Eliza Showell’s story on how a violent storm swept through her Sydney hair salon, Blondies, in 2017. Business Interruption insurance helped saved her business by maintaining her cash flow whilst they were closed for repairs.