Business Interruption & AICOW Cover: What You Need to Know

July 30, 2015 by Brendan Goddard

Companies depend on continuity to keep their business thriving. Unfortunately, despite the attitude (or hope) that “this will never happen to my business,” fires, natural disasters, and other impacting incidents do occur. In our previous blog post on business interruption, we revealed worrisome statistics regarding the number of businesses that do not hold adequate cover and an even more alarming percentage who do not have any knowledge of the existence of business interruption insurance.

Business interruption is vital coverage for a business owner, particularly a small business that is dependent on continued revenue to stay afloat. Research indicates that of businesses which experience a major disaster, around 40% of them never reopen, and a further 30% close within just 2 years. When the unexpected happens, companies with business interruption insurance are better equipped to handle the costs of recovery and to manage a loss of income. One additional coverage element which may assist businesses is AICOW.

What is AICOW?

AICOW stands for Additional Increased Cost Of Working. It is often confused with ICOW (increased cost of working.) From a basic standpoint, ICOW covers those increased costs of working that are not in excess of the loss of revenue that would occur if the increased costs were not paid (i.e. economic losses). AICOW, however, covers those costs which would exceed the resulting loss of revenue (i.e. uneconomic losses).

In most business interruption policies AICOW is an optional cover. However, it is a vital one which a business owner must consider. This cover allows for additional expenditures during a period of interruption that are required to return to business as usual. AICOW ensures you are up and running as quickly as possible, reducing the inconvenience for your customers and returning you back to a state of profit.

An Example of AICOW

Following a recent storm, a NSW business suffered significant water damage in their warehouse after a portion of the roof collapsed, affecting a large portion of their stock. The repairs for this involved more than $250,000 of work required to perform extensive replacements on the roof. During this period, the undamaged stock had to be moved to a different location while the roof was replaced. Not only is this a disruption to a business, but additional costs must be figured. In this situation, the company was assisted by their AICOW coverage, helping to offset the costs of relocating the stock (freight and storage).

Does Your Business Need AICOW Cover?

Business interruption policies vary greatly in their levels of coverage. These policies and associated circumstances can be quite complex. To ensure you have the appropriate insurance for your business, it is necessary to partner with an established and knowledgeable insurance broker. This is not a simple insurance policy that you can purchase online. Protecting your business from possible unforeseen circumstances is risky business, and far too important to be left to chance. Sadly, it is an all too common occurrence that business owners discover too late that they are underinsured or have an inadequate policy.

Is your business adequately insured? It may be time to review your risk management plan and speak with an experienced broker about business interruption insurance. Our team at Macey Insurance Brokers has years of expertise working with businesses across all industries. Working with us, we’ll help you obtain effective cover that reflects all your business needs and considers all risks, allows for an appropriate indemnity period, and covers your business comprehensively. Contact us today to start the quote process.

Brendan Goddard

Brendan Goddard

Director at Macey Insurance Brokers
Brendan has been a director of Macey since 2005 and in addition to servicing his portfolio of clients he is committed to the continuing management and growth of the business including general operations, human resource, marketing and IT management.

Brendan is a Qualified Practicing Insurance Broker and holds an Advanced Diploma of Financial Services (Insurance Broking).
Brendan Goddard

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