4 Things You Should Know About Business Interruption Insurance

Business-Interruption 

A study carried out by Zurich Insurance Australia found that in Australia, less than 40% of SMEs have business interruption insurance in place. The same study claimed that 23% of the SMEs surveyed responded that they had never even heard of Business Interruption Insurance.

Most businesses will not operate without property insurance, but in the event of serious property damage, it’s not uncommon for the Business Interruption component of a claim to be greater than the cost of repairing the physical property damage.

Costs incurred as a result of interrupted trading can accumulate quickly, so businesses across Australia can benefit from Business Interruption insurance. Our quick guide to Business Interruption Insurance demystifies the policy, how it works, and what it covers.

 1. What is Business Interruption Insurance?

Business Interruption Insurance is a type of insurance that covers the loss of income that a business suffers after a disaster.

 2. The Difference Between Business Interruption & Property Insurance

While Property Insurance covers the physical damage to the business, Business Interruption Insurance covers the profits that would have been earned if the business were operating as usual. It is designed to put a business in the same financial position that it would have been in if no loss had occurred.

 3. How to Buy Business Interruption Insurance

Business Interruption Insurance is not sold as a stand-alone policy. It can be added on to the business’ Property Insurance Cover or it can be purchased through a comprehensive package policy such as Biz Pack cover.

As Business Interruption is only included as part of the business’ primary policy, it only pays out if the cause of the loss is covered by the main policy.

 4. What May Be Covered By Business Interruption Insurance

A Business Interruption Insurance Policy will typically cover the following:

  • Profit: The profits that would have been earned during the time that that business is out of action (based on previous months’ income).
  • Fixed Costs: Covering the operating expenses and costs that continue to incur even though the business is not operating (based on historical costs).
  • Temporary Location: The expenses associated with moving to, and operating from, a temporary location.
  • Disruption: Covering the costs associated with disruption caused by service providers including power, telecommunications & water.
  • Extra Expenses: Cover for the reimbursement for ‘reasonable expenses’ (beyond the fixed costs) that allow the business to continue to operate while the property is being repaired.

PSC Insurance Brokers can give you advice on Business Interruption Insurance for your business. Speak to a broker for more information.

 


Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.

The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.


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