How to keep your business afloat in the event of a disaster
No-one likes to think that a disaster could happen to their business, but it can and does happen far too frequently in Australia. For example, the recent floods in Townsville which were declared a disaster zone; imagine the problems faced by small business owners who were prevented from trading during the aftermath of the floods.
Many small businesses can recover quickly following a disaster, such as floods, fire or the theft of vital resources, because they have the right type of property insurance. If you were not able to trade due to an incident for a period of time, ensuring you have the right Business Interruption cover will be invaluable.
What is Business Interruption Insurance?
Business Interruption Insurance gives your business an income if it is prevented from trading due to the occurrence of a specified disaster. Similar to insuring your physical assets such as your buildings, machinery or equipment, Business Interruption offers cover for your financial costs involved with every day running of your business.
In general, Business Interruption Insurance protects your gross profits, reimbursing you for the gross profits you would have made on an average trading day. It also covers additional costs you may have if you had to relocate your business to other premises. Moreover, you can tailor your policy to include fixed costs which covers the on-going costs you still have to pay, even though your business is not trading.
Whilst no-one wants to pay for insurances they don’t need, Business Interruption Insurance is one of those policies that can make or break your business. If a disaster strikes and your business can’t trade for six months, this would have a detrimental effect on your operations. With Business Interruption Insurance however, you can still pay all your bills and your employee’s wages, while you rebuild and get ready to begin trading again.
Avoid this one big mistake with Business Interruption Insurance
The biggest mistake made by business owners when they take out Business Interruption Insurance is that they underestimate the time it will take to get their business up and running again. The period of time an insurance policy will reimburse you following a disaster is the ‘indemnity period’ and once this time expires, you no longer receive these payments.
This can be another disaster, because if your business is not able to begin trading within a specified time frame, your business can still face financial disaster. Many businesses can take six or twelve months to get back on their feet, so making sure you set the indemnity period to realistic goals to ensure your business can return to its full earning capacity
This is why you need to discuss the indemnity period with a specialist in Business Interruption Insurance, who can help you to identify the best time frame to suit your specific business.
Lewis Insurance Services is here to help our clients understand how Business Interruption insurance can benefit their business. To discuss further, please contact Lewis Insurance Services on 07 3217 9015 or send us an email by clicking here.
This article was published by our AFSL Licensee, Insurance Advisernet Australia P/L (26/06/2019)
This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the Product Disclosure Statement.