When we highlight the importance of business interruption insurance, we often use examples of significant losses caused by floods, fire, storms or other catastrophes. Business interruption insurance IS important in these scenarios, but often the outages businesses may experience are caused by something much smaller or more mundane. For example, a bakery that needs to replace an oven from overseas, or perhaps something you have even less control over such as an event that impacts your supplier or supply chain!
What is business interruption insurance?
If you experience a disruption to your business income, your expenses continue to roll in. Business interruption insurance covers you for loss of profits. It can cover costs incurred to mitigate the interruption to your business, such as the cost of relocating to another temporary premise, paying overtime, additional equipment hire and so on. It can also include events that have an indirect impact on your business, such as a fire that happens in another part of a shopping centre that prevents customers from accessing your shop.
Do I need business interruption insurance?
We encourage many of our business clients to consider business interruption. A study of nearly 500 small businesses that CGU published in 2016 found that 1 in 4 would not survive if they had to close their doors for three months. Another quarter of small business would have to shut down if they experienced a major fire or storm and this figure jumped to 38% if the shutdown happened during a busy period for that business. In fact, 1 in 7 businesses experienced a shortfall in income because of a disruption within the last 12 months.
Business interruption can also:
- Protect your profits while you wait for plans or permit approval when rebuilding
- Cover the cost of advertising to let your customers know your new location and when you’re up and running again
- Continue to pay and retain your key staff while you work to reopen
- Include costs to your business from suppliers not supplying, or when power or gas outages limit your ability to operate your business.
Want to find out more or talk about whether business interruption insurance is right for your business? Contact us!