Business Interruption Insurance
Most small business owners like to prepare for unexpected events by insuring their premises, contents or stock. 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? That’s where Business Interruption cover (sometimes known as Business Income insurance) can help.
Business Interruption cover* provides protection for the loss of income and increased costs of operating your business caused by a specified insured event (such as property damage or fire). It is also designed to assist your business to recover from an insured event by paying ongoing expenses (such as wages or rent).
It provides some much needed peace of mind and security for when your business needs it most. Having Business Interruption cover works as a financial safeguard so you can spend less time worrying about where your income will come from, and more time on rebuilding your business back to where it was.
It is important to note that Business Interruption cover is an additional cover option available when you take out a Business Insurance policy.
Did you Know?
When a catastrophe occurs it can be the interference to trading capabilities, and not the event itself, that has the real potential to bring a business to its knees. Business interruption insurance is designed to provide compensation for the financial impact of insured events and assist your business to recover.
What is typically covered by Business Interruption insurance?
This is an overview of some of the key things that your Business Interruption insurance policy may provide coverage for
- Loss of turnover due to damage to your own premises as a result of an insured event
- Additional costs of working
What’s typically not covered by Business Interruption insurance?
This is an overview of some of the key things that your Business Interruption insurance policy does not provide cover for:
- Undocumented income
- Losses due to labour strikes and changes in legislation
- Losses beyond the indemnity period
- Voluntary closures
- Losses due to breakdown in equipment or machinery
Who needs Business Interruption insurance?
If you run a business that would be impacted significantly if an insurable event like a fire or flood were to occur, then you may need to consider Business Interruption cover*.
An example of a type of business that may benefit from Business Interruption insurance is a retail business that needs to rebuild their premises due to a stolen vehicle crashing into their store. While their business premises is being repaired, their Business Interruption policy can provide some much-needed financial reprieve.
How much does Business Interruption insurance cost?
Like with all business insurance policies, the cost is determined by the unique risk factors of your business. These include things like:
- The number of staff your business employs
- The type of activities your business performs
- The location of your business
- Your business’ annual turnover
- Your claims history
How long does business interruption coverage last?
One of the things you need to select when taking out your Australian Business Interruption policy is the indemnity period, also known as the period of restoration/ liability. This time frame selected is the maximum period that you can claim from your insurer for disruption to your business.
These time frames are typically 6, 12 and 24month options. It’s important to check that there are no waiting periods which may be applicable.
What kind of events could trigger a Business Interruption claim
These are some examples of the type of events which may cause disruption to your business and require the protection of Business Interruption insurance:
- Storm, hail, lightening, flood
- Busting, leaking overflowing pipes
- Burglary or theft
- Glass breakage
- Accidental damage
- Malicious damage
- Fire
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 while they were closed for repairs.
Frequently Asked Questions
Do you have enough capital to meet your financial obligations if an insured event halted your business operations?
Consider how much it would cost to continue paying for things like wages, loan repayments, rent and other bills.
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 insured event.
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.
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