What Risks May a Business Interruption Policy Cover?
As well as lost income, Business Interruption can cover the increased cost of working as a result of the accident or event that has impacted your business.
Put simply, in the event of damage to your property or assets, Business Interruption insurance covers you for costs you wouldn’t normally incur but that are necessary to get your business back in order. Some examples of situations that Business Interruption may cover are:
- A small accounting firm’s office is destroyed by fire. The owner has to pay rent in temporary accommodation to house the staff while repairs are carried out on their premises. Business Interruption cover could reimburse the business owner for the cost of rent.
- An electronics shop has been affected by flood and employees have had to work extra hours to clean the store and sort through stock. The shop owner therefor has to pay these employees overtime to get the store back up and running, which can be covered by Business Interruption insurance.
- A retail store within a shopping centre cannot be accessed by customers as a result of a fire in another part of the centre. Although the fire didn’t directly affect this shop, a Business Interruption policy may cover the indirect impact.
- A restaurant’s kitchen has been destroyed by storms. To get back up and running, the owner has had to hire in extra equipment as well as additional temporary staff. Business Interruption insurance can cover these expenses.
- A pet store has had to close for a short time and relocate as a result of an accident at their property. They need to make their customers aware of the changes to their business using poster advertising. Business Interruption Insurance can cover advertising costs to tell their customers that they’ve moved and are now ‘back in business’.
While Business Interruption is very common in larger Australian companies, the majority of small businesses will decide not to take out this type of insurance. Operating without Business Interruption insurance is a serious risk.
As a business owner, the continuing success of your business is dependant upon your ability to manage, mitigate and transfer risks. Business Interruption costs are typically difficult to predict and to evaluate. It is therefore imperative to back up your prevention strategies with a comprehensive insurance policy that can fully protect your business, employees and the general public.