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Business interruption insurance – what is it and why do you need it?

  • Adroit Insurance and Risk
  • August 10, 2015

Business owners face risks every day, many of these arising out of unforeseeable circumstances. That’s just life, we experience the unexpected.

Take the wild weather seen in NSW earlier in the year, for example. These extraordinary storms have affected thousands of businesses, potentially putting them out of action for weeks and sometimes even months.

Business owners have a lot to lose in many circumstances. By using business interruption insurance, business owners can transfer the financial risk and the associated stress from themselves and their staff to an insurer. The premium for such cover is a small price to pay, indeed.

Just consider how you would feel if your business suffered some sort of damage and not only lost the use of the asset, but lost the income derived from its use.

Let’s say your building or a key piece of equipment is damaged and the costs to replace or repair are insured. While it’s comforting to know you have cover in these respects, it’s equally important that the revenue gained from the use of these assets is covered as well. Business interruption insurance covers this loss of income and provides much needed peace of mind. The loss of income also stems to future income; what happens if you lose a portion of your customer base from being out of action? These are all things to consider.

The same principle applies if a supplier suffers storm damage and cannot operate. If you can’t gather the stock or capital you need, then that will obviously affect your business in a negative way. Many businesses in NSW would have experienced exactly this in April. The right Business Interruption insurance cover can protect your business in these scenarios.

Business interruption insurance also covers you for the costs incurred in these situations – and they can stack up! Costs for relocation to temporary premises or advertising costs to let your customers know you’re out of action can be claimed against the cover.

Think of it this way: do you want to risk your income, your investment, your mortgage and most of all – your reason for getting up in the morning? You need to hope for the best and plan for the worst!

Business interruption insurance is so important for all businesses. That said, it shouldn’t be treated as a business cost (it’s tax deductible, by the way!) but as protection and peace of mind. Those two things are priceless.

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