Business Interruption Insurance
The owners, Shareholders and/or those that have provided investment finance expect an income stream that will cover the financing costs, the cost of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets, etc. The net profit and ongoing expenses including payroll, management and other staff bonuses and financing costs are all regarded as insurable gross income or gross profit depending on the policy, but whatever it is called, these expenses should be insured. Without it your business may simple go down the plug hole in the event of a loss.
Business interruption insurance is at its heart a policy of indemnity. This means that it is designed to put the insured back to the same position, as near as money will allow, to what they would have enjoyed but for the loss.
Typically following a fire or other insured peril occurring at a business premises some form of interruption to the business occurs. This disruption results in a reduction in insurable gross profit.
Who should have business interruption insurance
There can be no foolproof checklist for who does and does not require business interruption insurance. But unless you have vast cash reserves and can afford to fund your own business recovery, you should strongly consider business interruption insurance if you tick any one of the following.
- I or my business owns commercial property
- My business is a manufacturer
- My business is a wholesaler
- My business is a retailer
- My business relies on key stock, equipment, suppliers or customers which is / are not able to be immediately replaced
- My business is financed by debt
- My business would lose revenue if I was unable to operate from our existing building
- My business could keep operating after a loss but there may be significant increased cost
Business Interruption Insurance Calculator