The Basics of Business Interruption Insurance for Sunshine Coast Firms
Cash-flow is king as the saying goes. It is one thing to insure your physical property of the business, but how do you keep your business running in the event of a loss?
Business interruption insurance is designed to protect the loss of income and assist a business to return to the same financial position as if the loss never took place.
If your business experiences a loss, such as your physical building burns down or an electrical storm wipes out your power and you cannot continue to work, your property or material damage insurance policy is triggered to repair your physical business. What happens though in the meantime? Repairs to your building or replacing electrical / computer equipment or data may take months or even years. Do you still have wages, or have to pay rent or mortgage? Do you still have creditors who want to be paid? Your property or material damage insurance policy does not cover this.
What is Business Interruption insurance?
Business interruption insurance for Sunshine Coast businesses in its simplest form as explained by LMI, (Loss Management International Pty Ltd) it is an insurance cover on revenue or gross profit that has been produced to help achieve putting a business back to where it ought to be financially as if a loss never occurred.
The cover starts from the date of loss and then extends until the business turnover and profits are where they were prior to the loss. (Subject to the indemnity period – insurance period chosen for a claim to be paid out for)
This can be a complicated insurance to calculate it is always advised to seek professional advice from qualified Sunshine Coast insurance brokers such as Insuring theProduct and read the policy PDS / Policy Wording before choosing any policy.
Business interruption insurance can be written as a stand-alone policy; however, it is usually combined with an existing business insurance package.
How to Select the Appropriate Policy
The main problem is that it can be difficult to select the appropriate policy. Consulting with a small-business insurance broker like Insuring theProduct should be the first step. To apply for business interruption insurance, you’ll need to provide proof of your current income and make estimates regarding your future income.
The policy needs to respond in the worst case scenario that the loss occurs at the end of your current insurance period and continue paying your loss of income during the indemnity period. The calculation of your sum insured should be negotiated between your accountants and qualified insurance broker to ensure that the correct financial figures are used and trended for your business growth, altering rates of growth profit and other influences in your business for the insured period and beyond.
This calculation can be complex and needs to be correct for your policy to respond in the event of a claim. Without ensuring that the sums insured are correct you risk the possibility of under insurance penalties or delays with your claim settlement.
Your insurance broker will also factor in additional policy cover and extensions to ensure that you have adequate cover for ‘additional costs’ incurred (i.e. temporary premises, bonds, out-sourcing etc), book debts, rewriting of records and other cover that is specific to your business and its needs.
Get Protected Now
Ensure your business doesn’t lose revenue from disasters and interruptions. Contact a small-business insurance broker to protect your income stream.
This information is not intended to be advice and you should not rely on it as a substitute for any form of advice. You should always consider the PDS / Policy wording before making a decision.
Do I need business interruption insurance?, Insurance Information Institute
Business Interruption Insurance: What It Will — and Won’t — Cover, Entrepreneur