Things you need to know about Business Interruption Insurance
Don't lose your business! Could your business stay open if you had no revenue, but still needed to pay your ongoing costs? Would you have to close the doors? This is often the situation for SMEs who suffer a disaster and don't have Business Interruption insurance.
Underinsurance is one of the biggest problems faced by SMEs today. You might think that a lack of capital might be the biggest problem, but with the right insurance cover, SMEs can wade through any disaster. It's underinsurance, specifically Business Interruption Insurance, that can make the difference between the success or failure of a company. So why don't SMEs have this vital cover?
Most likely, this omission is simply due to a lack of awareness of this coverage. This is often due to the fact that most SME managers are time poor and spend the minimum amount of time setting up their policies. Once set up, they are also unlikely to review these policies on a regular basis, unless a claim is denied.
This omission can be devastating for SMEs, because the implications and risks involved in not having the right type of insurance can cause a business to close its doors and stop operating.
So what is Business Interruption Insurance, why is it important, and what does it actually cover?
1. What is Business Interruption Insurance?
Business Interruption Insurance covers your SME against financial loss to the business as a direct result of an incident at your premises, which would cause vital interruption to the daily operation of your business. These incidents can be events such as a massive fire or storm, even theft of equipment.
2. Why is it important?
In the event of a disaster that prevents your business from operating, you will very quickly find that profits dry up and you are in the red. The problem is, your ongoing bills will keep coming in, including employee wages, lease payments, suppliers and any other costs that are ongoing. These bills must still be paid, even though you don't have any revenue coming into the business.
On top of all of these financial obligations, you may have to rebuild and restock. This can take more than a year to complete, and if you want to keep operating during this time, you will need to temporarily relocate your business, until the rebuild is complete.
Given this scenario, it's easy to understand why many SMEs simply close their doors, because without Business Interruption Insurance, they simply can't afford to rebuild and restock, as well as shoulder their financial obligations during this time. On top of all this, they can't afford to relocate, so they stop operating and fold.
3. What does Business Interruption Insurance cover?
The solution is to ensure you are fully aware of your financial commitments and what your current Business Interruption Insurance covers. Your policy can be tailored to cover financial costs such as lost profits, cost of temporarily relocating, hiring equipment and any other costs incurred to keep your business operating as you were prior to your business incident. Business Interruption Insurance will allow you to continue to cover your staff wages, as well as the costs associated with interrupted utilities, even if your business is temporarily closed.
In essence, your insurance policy can cover you from when your incident occurs until you are fully back up and operating and into the same financial position as you were prior to the incident.
To find out more about Business Interruption Insurance for your business contact me today.
General Advice Warning
The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Gail Findlay.