What You Need to Know About Business Interruption Insurance

Storms have recently lashed New South Wales and as of 24 May, 2015 the Insurance Council of Australia has advised that 29,065 claims had already been received with damage expected to exceed $200 million. This is not even taking into consideration damage from the storms and hail that followed a few days later.

We saw major power supply, transportation and access problems across the state. Unfortunately in Australia, these weather events are not isolated to one area – they really can affect anybody, and as we have seen in recent years, it takes time and money to recover.

Running a travel business involves a lot of uncertainties. Not only weather, but other natural disasters, crime and accidents are just some of the things that could affect your business in the future. Unfortunately none of us have a crystal ball, but you are able at least to minimise the effects on your business. By adding Business Interruption to your business insurance policy you can protect your business from loss of income arising out of many of these perils.

What is Business Interruption all about

As the name suggests, business interruption insurance covers you for loss of revenue if your business is temporarily out of action as a result of an insured event such as a fire. The Cameron Research Group (2012) found that 65% of small to medium businesses didn’t have business interruption protection.

Why Business Interruption is so Important

This cover is crucial to any business owner as it provides them with coverage in the event of unforeseen circumstances arising out of your business. This coverage can reduce the worry of additional expenses caused by the interruption.

What to consider

The most important aspect when considering loss of revenue is the direct loss to the business. Everyone appreciates the need to ensure the business will survive during a period of closure. Business costs such as loans, lease repayments, salaries for staff who are retained during the period of closure and utilities are just a sample of the costs that need to be addressed while the premises are being repaired.
There is a common belief amongst business owners that either “it won’t happen to me” or if it does, it won’t take long to get up and running again. Sadly, this is not the case and many businesses that do not have this insurance struggle to survive following a disaster.

The business interruption policy can cover much more than just loss of revenue. It can extend to include:-

• Additional costs incurred to get the business back up and running
• Claims Preparation costs (such as accountants or auditors fees)
• Prevention or hindrance of access to your premises caused by an insured event,
• Disruption caused by a failure of supply from a public authority caused by an insured event, or even a murder at your premises
• Your losses after any of the following:-
  

1. Damage to property used by you at your premises caused by an insured event e.g. the landlord’s building, a sub-station on your premises owned by an electricity company.
2. Damage to a customer’s premises caused by an insured peril;
3. Damage to a supplier’s premises caused by an insured peril;

The cost of this insurance varies depending on the risk factors involved, but it is generally very affordable and can protect your business.

If you believe that this issue is relevant to your business, please feel free to contact Rebecca Fleming, Account Manager of our Travel Industry Division at Gow-Gates Insurance Brokers on (02) 8267 9919 or rfleming@gowates.com.au to discuss your circumstances or to obtain a quotation.

Gow-Gates Insurance Brokers advises that persons should not act on the material contained in this article as the items are of a general nature only and may be misinterpreted. We therefore recommend that advice be sought before acting in these areas.