p r o d u cts
BUSINESS
INTERRUPTION
INSURANCE
A
ll businesses take great care to
ensure that their assets and liabilities
are adequately insured against
financial loss due to a defined event, outside
their control. However, few businesses take
the time and care to ensure they have a
business to go back to.
Business Interruption (BI) insurance is a
vital policy protection for all businesses –
yet it is commonly misunderstood, ignored,
overlooked or underinsured by business
owners.
Put simply, BI insurance will provide an
ongoing income stream for the business,
to ensure that ongoing fixed and variable
expenses are paid and the expected Net
Profit of the business is protected. Without
this cover, the survival of a business will be
dependent on the level of cash reserves it
holds, to cover expenses for possibly six
months, 12 months, or 24 months.
How long would it take you to rebuild
the workplace, refit, restock, reconnect
with customers and restore the budgeted
income?
The last thing a business wants is any sort of
impact on its income, or flow on effects that
impact the delivery of services to new and
existing loyal customers. If customers’ needs
cannot be met, they will take their business
elsewhere.
360° protection
It is critical that all businesses give thought
to and document a Disaster Recovery Plan.
This will highlight the actions that need to
be taken both in the short and long term
to continue the support to customers and
maintain income. These actions will often
include; leasing a temporary premises, hiring
temporary equipment and additional staff,
and outsourcing manufacturing operations.
All these actions of course come at an
additional cost which can be factored into
the BI insurance program together with the
costs of the business’s own independent
claims management consultant.
Recent research conducted on nearly 500
small businesses found that one in four
would not survive if they had to close their
doors for three months. The reports also
showed that approximately half of the
businesses that suffer a total loss did not
resume trading; whilst about a third of those
business that did resume activities, fail within
three years. Why? Because they did not
have a Disaster Recovery Plan supported by
appropriate BI cover.
When a business considers its BI protection
requirements it must include the following:
• Documented detailed Disaster Recovery
Plan.
• Establish the amount of additional money
required to support the Plan.
• Prepare advanced budgets and financials
for the business.
• Have a discussion with other businesses
in the industry about obtaining critical
customer support in the advent of a
significant property loss or damage.
• Consider coverage for the business’s
Gross Profit based on a figure, two years
in advance.
• The period of policy cover will be the
time taken to restore business activities,
recoup customers and reach the
advanced budgeted income figure for the
business.
For more information on Business
Interruption insurance for your business,
contact your AWA Appointed Insurance
Broker: Insurance Solutions Corporation.
Robert Mandarino, AWA Facility Manager, can be contacted on 03 9907 3600 or 0437 551 172.
Windows Magazine Winter 2016 45