Business Interruption / Loss of Profit Insurance – what is it and do I need it?
Imagine the following scenario: there has been a fire at your business premises and as a result of the damage, you will not be able to operate from there for 3 months.
Below are some questions to ask yourself to consider how your business would fare in such an event. Ask yourself these questions and consider your level of savings, whether you can use your family funds, or additional loans to fund the below costs – do you have enough?
Do you have sufficient savings to meet ongoing expenses such as wages, electricity and other fixed business expenses?
Business Interruption Insurance can provide cover for these expenses.
Do you have sufficient savings to cover the costs associated with an alternative location for your business until you can get back into your premises?
Business Interruption Insurance can provide for the additional increased costs incurred in just keeping the doors open.
It’s fair to assume some customers will go elsewhere while you are dealing with a relocation and reopening – do you have sufficient savings to cover the shortfall in turnover during this period?
Business Interruption Insurance can provide sufficient funds to cover your drop in gross profit.
Now imagine the same scenario but make it a 9, 12 or 18 month interruption and work through the same questions.
While we all understand the importance of insuring our business premises and assets in case of a fire or other insured loss, many businesses fail to insure for their Gross Profit (turnover less purchases) referred to as Business Interruption Insurance, as they don’t understand the exposure.
Business Interruption cover can generally provide cover for loss of Profits, Rental Income and employee Wages following a reduction in your turnover caused by a loss or damage to insured property. This cover is critical for a business’s survival following a major insured loss such as damage caused by fire or storms or major accidental damage.
So, what you’re saying is that I still need business interruption insurance?
What we’re saying is that you should seriously consider it, particularly in light of the fact that statistics compiled by the Insurance Council of Australia over a number of decades show that 70 per cent of businesses without business interruption insurance eventually fold when a storm, fire or other event prevents the business from operating for a significant period of time.
If you aren’t sure whether or not you need business interruption insurance, we suggest you discuss your options with a representative from the OurAuto team or your Marsh Advantage Insurance contact who can work through what your potential exposure is and how much it will be to insure it by completing a simple endorsement to your existing Business /Motor Trade Insurance Package.