Understanding Business Interruption

Zurich Insurance Australia completed a recent research study which determined that less than 40% of small and medium-sized Australian businesses had insurance coverage for business interruption. An even more worrisome statistic showed that a mere 23% of those businesses had ever even heard of business interruption insurance. Such numbers are alarming given the monumental economic losses that can occur from unforeseen business interruption. Have you heard of business interruption insurance?

When the unthinkable happens, companies need business interruption insurance to give them time to get back on their feet and become financially stable. Following a natural disaster, fire, or other incident, there are not only the costs associated with recovery and rebuilding, but there can be a substantial loss of income if business cannot continue as usual. However, business interruption policies can cover a business, protecting against loss of revenue as a result of unforeseen damage which causes business interruption.

What Does Business Interruption Cover?

While property insurance protects your business from damages to the physical property, sudden events like fire, flood, or heavy storms can result in your business remaining inoperable for months. During this time, there may be continuing costs for your business, such as rent, utilities, or overhead. Business interruption insurance is designed to protect the financial position of your company. If it takes months to repair damages and reopen for business, this could cost you tremendously. Even once you do reopen, it may be some time before your state of business returns to pre-incident condition. Business interruption coverage is built to help you through all of this and return you to the same financial position you were in prior to the loss.

Businesses that rely heavily on other industries and suppliers may also consider contingent business interruption insurance. This applies only in very specific circumstances, but can cover these businesses against a significant loss or kink in the supply chain which impacts their ability to operate.

Understanding Your Policy

While business interruption policies can appear fairly straightforward, the factors surrounding coverage can be highly specific. When damage occurs, your insurer must assess that damage has occurred and determine that it directly results from the unforeseen incident, such as a flood. The process of determining your coverage and sorting your claim is quite complex, and involves careful calculations of your financial position and how a loss will affect you in terms of business interruption.

Policies differ widely in their wording and coverage. Because business interruption claims are so involved and intricate, it is imperative to work with an experienced insurance broker to help you navigate the process. Far too often, business owners find that the complicated and frustrating claims process is costing them additional time and money, or discover too late that they are underinsured or have inadequate or improper cover.

If you are a business owner, it is paramount that you become educated regarding business interruption insurance. Such a policy could mean the difference between massive financial loss and the continued success of your business. At Macey Insurance Brokers, you can work closely with a professional, qualified broker to understand the needs and risks of your business. Contact us for more information on your options, and start protecting your business today.

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