With the recent devastating floods and torrential rain that impacted North Queensland, and the ever present danger of Cyclone’s threatening the South East Queensland Coast, Citycover is examining Business Interruption Insurance and why it’s important you have it to protect your business.
Business Interruption should not only be considered to be solely caused by physical loss or damage to property, but is also now being driven by cyber attacks, technical failure and geopolitical instability. So whilst the weather threat is still a major concern for us, and especially at the moment, little do we realise our reliance on technology daily is also a constant threat.
So what does Business Interruption insurance cover?
It’s designed to put you (our Insured) back in the same position, as near as money will allow, as if the loss had not occurred.
Damage or losses will create some form of disruption of trading resulting in:
- A reduction in sales, service or production.
- A drop in sales or services will lead to a loss or reduction of “insurable” Gross Profit.
Unfortunately when an interruption occurs to a business, it often puts an additional strain on finances of the business. There is usually little income (if any) being produced during any interruption of this nature.
Typical business expenses include:
- Accountants Fees
- Freight, Cartage, Delivery
- Insurance premiums
- Electricity, Gas, Water
- Wages & Salaries
- Printing & Stationary
- Office Expenses
- Telecommunications & Mobile Phone expenses
- Hire purchase repayments
- Interest payments
- Motor Vehicle expenses
- Travel expenses
It’s these expenses that would be impacted or would cease if the business was interrupted or if you stopped trading.
You can either insure your businesses:
- Gross Income:-
- The money paid or payable to you for goods sold or services rendered, less the purchase price of stock (Turnover < less purchases).
- Suited to small retail outlets with goods sold, or professional occupations with small to medium turnover.
- Gross Profit:-
- The turnover less the net cost of goods, materials and services relating to the turnover. (Turnover < less purchases < less expenses not insured).
- Suited to businesses with medium to large turnover including large wholesale, large retail, manufacturers, production type businesses and companies with a large wage roll.
- Weekly Income:-
- A weekly sum insured is selected. In the event of a loss, the average weekly income of the business for the preceding 12 months is compared to the actual weekly income after the loss and any shortfall in turnover is paid.
- Suited to small service type industries, sales, commission, fees and companies that can re-establish easily at another address without any major disruption to turnover.
For more information regarding Business Interruption Insurance, or to speak to your Adviser, please contact Citycover on (07) 3270 1500. It’s important to consider what impact a major disruption or interruption would have on your business and how quickly it could recover.