Business Interruption Insurance
Business interruption insurance is designed to put your business back in the same financial position it would have enjoyed but for the loss. It has a carefully thought out formula, that is well tested to achieve this stated aim of putting the business back where it ought to have been financially.
The cover starts from the date of the loss and extends to when the business’s turnover and profit levels are back to where they would have been but for the loss. There is a cap set on this known as the Indemnity Period, which is chosen by the Insured when the cover is taken out and is recorded in months on the Policy Schedule.
The trigger for a claim is damage to insured property caused by an insured peril. Cover however can be extended to cover disruption from a number of sources upon which the business is dependent such as public utilities, customer’s and supplier’s premises, prevention of access, closure by public authority, murder and suicide, and the like.
The past performance of the business is measured for levels of turnover and insured gross profit and these are adjusted as part of the estimation process to determine what level of turnover and insurable gross profit would have been generated but for the loss. The adjustments made are to take into account the trend of the business had the loss not occurred. From this estimate of the turnover that would have been earned but for the loss, is deducted any turnover that was actually generated. This determines the shortfall in turnover.
Additions and subtractions are made to the shortfall in turnover to take account of any savings in expenses the business has made and any additional costs that have been incurred in running the business during the period of disruption.
Extra covers are available for claim preparation costs to employ an expertise to maximise your business interruption claim.
Another important optional cover is additional increased cost of working which allows additional expenditure to get your business up and running as fast as possible so that your customers are inconvenienced as short a time as possible and you can get back up and running in the shortest possible time.
Focus Insurance Brokers understand the complexities of this important cover. We will discuss with you:
- Your unique business interruption exposures
- Your cover options
- The “insurable gross profits” calculation process
- An appropriate indemnity period
- Wages cover options
- Additional Increased Cost of Workings cover
- The expenses you should consider covering
Reseach indicates that:
- Every year 1 in 500 businesses will experience a severe disaster (McGladrey and Pullen)
- 43% of businesses that experience disasters never re-open and 29% close within 2 years. (McGladrey and Pullen)
It is widely recognised that many businesses in Australia do not purchase business interruption cover or the cover purchased is inadequate.
Please give us a call to help you navigate this complex and important risk management / insurance product.