Business interruption insurance – why you need it

If you own and run a business, you most likely rely on a steady income just to be in operation, so how would you cope if your business was suddenly unable to operate? Many businesses would find it a considerable struggle – indeed around 43% of businesses that experience a disaster never re-open due to the income lost.

When business is interrupted through no fault of your own, the financial implications can sometimes be more serious than the damage itself.

Resilium’s Director of Compliance, Drue Castanelli, says that some business owners only realise how much there is to lose due to Business Interruption once it’s too late – when an uninsured loss occurs.

“Should a disaster take place that stops your business from operating, you will soon find that the bills will keep coming, including employee wages, rent, supplier costs and other on-going operational costs,” he says.

“The bills will still need to be paid even though your business isn’t operational and making any money.”

“Add to this the fact that the disrupted business may need to be rebuilt and restocked, or possibly moved to a temporary location until the damage or rebuild is complete,” he explains.

“All of this comes at a pretty hefty price, so it’s really no wonder that many uninsured small businesses end up closing their doors after a disaster.”

Mr Castanelli says that as far as insurances go, Business Interruption insurance is one that all businesses cannot afford to be without.

“Business Interruption insurance essentially can give business owners some peace of mind that should disaster strike, they can feel comfort that this insurance will put them back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.”

What does Business Interruption insurance cover?

Business Interruption insurance can provide broad financial protection for a range of small to medium sized business types and occupations.

Most Business Interruption insurance policies typically cover:

• Profits: Based on previous monthly performance, a policy will generally provide reimbursement for profits that would have been earned had the event not occurred.
• Fixed costs: These can include operating expenses and other incurred costs of doing business.
• Temporary location: Some policies cover the costs involved with moving to and operating from a temporary business location.
• Commission and training cost: Machinery may need to be replaced and staff trained how to use the new machinery.
• Extra expenses: Reimbursement for reasonable expenses (beyond the fixed costs) so the business can continue operating.
• Business that attracts customers: Damage to property of a major tenant, if your business is located within a multi-tenanted retail shopping complex and the damage results in a reduced pedestrian count in the shopping complex.
• Employee wages: Coverage of wages while shutting down, helping the business owner make payroll.
• Taxes: Businesses are still required to pay taxes, even when disaster hits. Tax coverage will ensure a business can pay taxes on time and avoid penalties.
• Loan payments: Coverage of loan payments even though the business is not generating income.

With the right insurance cover, businesses can navigate through disaster without too much effect. Having Business Interruption insurance in place can quite simply mean the difference between staying in business versus closing its doors for good.

“In essence, a Business Interruption insurance policy can cover you from when an incident occurs, until you are fully operational and in the same position as you were prior to the incident,” says Mr Castanelli.

Policies can be tailored to your particular needs, covering financial costs like lost profits, staff wages and other operational costs, as well as the cost of relocating to temporary premises if required.

To find out more about Business Interruption Insurance talk to a Resilium Adviser today.

The information provided in this article is of a general nature only and has been prepared without considering your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Resilium directly.