Business Interruption Insurance - Don't Get Caught Without It

Research reveals that 85% of small businesses believe that they have "adequate" insurance for their businesses*. But of these businesses:

13% did not have fire insurance
20% did not have burglary insurance, and
13% did not have businesses interruption insurance.

It is important that, as a small business owner, you think about your business insurance needs carefully to minimise any additional risks and potential exposures.

Your basic business insurance might cover your physical assets if disaster strikes, but have you thought about how your profits will be affected if your business is out of action as a result of the damage? What happens to your income if a storm, fire or even a neighbour's disaster forces your business to close for days, weeks or more? Your turnover will have suffered but you'll probably still have the same fixed costs like rent, staff wages and supplier commitments that don't stop even if you're unable to trade.

Essentially, the purpose of business interruption insurance is to make sure that the financial position of your business returns to where it was before the loss. Your insurer will assess your profits and turnover and factor in seasonal variations and trends for an understanding of your potential loss after an insured event.You need to have a property policy to be eligible for business interruption insurance and the damage incurred must be of the type that would be covered under that property policy.

Business interruption insurance also covers elements that you may not have even thought about. For example, if you have suffered a major interruption to your business, you might also find that you need to spend extra money to get back up and running. For example, there's the additional rent you might have to pay for temporary premises, or the costs of employing additional staff to assist in the clean-up process.

These can also all be covered by business interruption insurance - it's called 'additional increased cost of working'. This means you can spend a bit more to minimise the inconvenience to your customers and employees and get back to normal as quickly as possible.

Considering all these benefits and cover, it's hard to imagine that only 31 per cent of small businesses actually have business interruption insurance. According to Cameron research**, larger businesses and those that have been in operation for more than 10 years are more likely to be covered for business interruption.

Now is the time to be proactive and control the parts of your business that you can, including having the right insurance cover to protect your business from loss and interruption. This will help ensure your insurance policy gives you the confidence to know your business will weather any storm.



Important note:
* Cameron Research Group 'The Australian Samll Business Market for Financial Services 2008:Insurance and the Small Business Market' June 2008.
** Cameron Research Group 'The Australian Samll Business Market for Financial Services 2008:Insurance and the Small Business Market' June 2008.