Business Interruption Insurance at a Glance
What is business interruption insurance?
If your business suffered an unexpected disruption, such as a fire, flood or storm, or a major supplier closed because of one of these events, how long would it take to get it up and running again? And how much would you lose along the way?
Business interruption insurance can help ensure that your business keeps running smoothly after an unexpected event by covering the turnover that is lost so you can recover and rebuild.
Who should consider it?
For most business owners, ongoing expenses—like staff wages, supplier invoices, rent, or loan repayments—are necessary even if they are not generating revenue.
Business interruption insurance can help you through a temporary crisis by protecting your cash flow. This allows you to pay these expenses and help ensure the future of your business.
What can it cover?
Business interruption insurance can cover the loss of any sales you would have made while your business is out of action – plus any extra costs you incur to stay open. Depending upon the policy, business interruption insurance can cover:
Revenue/income Fixed costs
Temporary relocation Extra expenses
Civil authority ingress/egress
What usually isn’t covered?
Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer. In most cases, in order to claim under a business interruption policy, the loss has to arise from damage to property (buildings, stock and contents) which was insured and the damage to property has to be claimable under that policy although there are some limited situations in which cover is provided even though there is no damage to insured property.
Business interruption insurance is subject to the same exclusions as the policy covering buildings, stock, and contents.
Case Study
Linda owns a small office supplies business, with eight staff on the payroll and numerous suppliers.
Late one night, the restaurant next door caught fire, spreading to her business premises and destroying the property along with the stock and IT systems. She was unable to open the shop for weeks while the building was being repaired. Because the business wasn’t operating, she was not making any money, and the bills were piling up.
But with business interruption insurance, Linda banks an insurance payment, maintaining her cash flow at the pre-interruption level. Linda can continue paying her staff their regular wages so they keep their jobs and rent a temporary location so the store can keep running.