Who needs business interruption insurance?
Business Interruption Insurance helps your business to keep operating in the event of a disaster, for example your warehouse catches fire, your showroom is flooded or essential equipment is stolen. If any of these events prevent your business from trading, then Business Interruption Insurance can cover your business’s financial losses from the everyday unavoidable costs of running your business, even though you can no longer trade.
The question on the minds of many business owners however, is do they really need this type of insurance for their business?
Who can benefit from Business Interruption Insurance?
Just because you can’t continue trading and you aren’t generating any revenue, doesn’t mean that all your costs stop as well. Let’s take a look at some of the ongoing costs that your business will still have to pay, even if your buildings have burnt down or your store has been flooded and you can no longer trade.
Do you need to pay your employees’ wages?
Without a significant cashflow coming into your business, paying employee wages for the weeks or months until your business can recommence trading might be quite difficult. How will your employees manage to live without a wage? How will you manage if you can’t draw a salary from your business?
Do you need to pay loans or rent?
Have you taken out any loans to fund your business or purchase assets or equipment? These loans won’t go away just because you are no longer trading, as they still need to be paid every month. The same is true for rental leases, which need to be paid, whether or not you are able to trade. How will you pay for these loans or leases?
Do you need to pay your suppliers?
Since most businesses pay their suppliers at the end of the month, but certainly not immediately, you may well have a number of suppliers waiting to be paid. How will you pay these invoices without any revenue? Will they look for other customers to take the place of your business? Will they still be able to supply your business when you recommence trading?
Do you need to pay your utilities?
Gas, electricity, water and even the council rates (rates are relevant if you own the buildings), all these bills still need to be paid. Since these bills are generally paid quarterly, they can be a significant strain on your cashflow, so how will you pay them?
Do you need to pay your insurance premiums?
There are a number of insurance policies that are essential for a wide range of businesses, from professional liability insurance to product liability insurance, vehicle insurances, property insurance, theft and burglary, tax audit insurance, employee fraud insurance, cyber insurance, and the list goes on. Do you have the cashflow to continue paying these premiums whilst not trading?
So to answer the question – do you need Business Interruption Insurance? If your business has any of the above costs, then you could benefit from this type of cover. Business Interruption Insurance protects your gross profits, to keep your business running. This can be detrimental to your business and ultimately, make or break it.
To decide whether Business Interruption Insurance is suitable for your business, 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 (19/11/2019), www.insuranceadviser.net
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.