There is more to protecting your business than simply insuring the physical assets. As an owner, you expect an income stream that covers the operating costs and achieves a reasonable level of profit — but how do you keep your business up and running in the event of a loss?
Business interruption insurance is designed to put the business back in the same financial position as if the loss had not taken place. The cover starts from the date of the loss and extends to when the turnover levels are back to its pre-loss level. The net profit and ongoing expenses are important considerations for your insurance program. Without such coverage, your business may not be able to survive in the event of a serious loss.
What can your business be covered for?
Business interruption insurance provides coverage for:
- Ongoing expenses like payroll, financing and other fixed costs
- Revenue earning operations, supply chain and manufacturing dependencies
- Disruption caused by service providers including power, telecommunications, water
- Additional increased cost that may be incurred to expedite the return of normal business operations
How long will the policy pay for the interruptions to your business?
This is known as the ‘indemnity period’ and needs to be discussed in depth with your insurance adviser. The indemnity period should represent the maximum amount of time it will take to get the turnover of the business back to normal after a worst case scenario incident. Some of the factors your adviser will consider include:
- Regaining customers and market share
- Debris removal
- Tender procedures
- Repairs and installation of equipment and facilities
- Purchase of new equipment, installation and testing
- Pilot run and regaining stock levels
How a business would be interrupted in the event of a loss is unique. An experienced insurance adviser can help you understand the risks and recommend the most appropriate insurance coverage and indemnity period.