What to know about business interruption insurance this bushfire season

The past few years of natural disasters, from bushfires to floods, have reminded many business owners about the importance of business interruption (BI) insurance.

It's been the difference between keeping their doors open or closing shop for good for some businesses. Business interruption (BI) insurance allows businesses to maintain their cash flow and pay regular outgoings such as rent and wages. We’ll delve into who needs BI insurance, what it covers and how it works.

Who needs BI insurance cover and how does it work?

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.

It can also cover:

• Ongoing operating expenses, such as electricity and rent.
• Relocation costs for moving to and operating from a temporary location.
• Training costs for operators of replacement machinery.

Under a business interruption policy, businesses that suffer an insurable event may also be able to claim for loss of income.

It can also cover loss due to:

• Closure of your business premises due to government-ordered street closures or curfews.
• Damage to a supplier’s premises which has a negative flow-on effect on your business operations.

“Business interruption insurance can cover the loss of any sales you would have made while your business is out of action”.

When considering this insurance, you may come across the terms ‘indemnity period’. This is the maximum period that you can claim for subject to being able to prove the loss and other terms and exclusions of the policy. An insurance broker can help you find various insurance options based on your specific needs. The time you need for recovery will depend on a number of factors. For example, if your business is built on a critical piece of equipment, you should consider how long it would take to replace it, particularly if it’s manufactured overseas.

How BI insurance can work

This type of cover isn’t just important for closures following damage to your business or its equipment. Steadfast Broker Technical Manager, Michael White says some of the most common claims during the 2019/2020 bushfires were business interruption claims due to prevention of access.

“For example, there were a number of roadblocks during these bushfires, which could prevent a café or store owner from accessing and running their business,” Mr White says. “With the right cover, a business owner can be reimbursed for the revenue they lost while they were unable to access and open their premises to customers.”

Expert advice to ensure you have the right cover

It’s risky to guess the right insurance cover for your business. An insurance broker can provide guidance and advice based on your specific business risks. Contact BICS today for your peace of mind.

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