Business Interruption Insurance - Cashflow Protection
Cash flow is paramount to survive and prosper. To protect your business income from being reduced dramatically through an unexpected catastrophe such as Fire, Storm, Damage or Theft, a business with take Business Interruption insurance.
Business Interruption Insurance allows a business to continue to pay business operating expenses such as rent, electricity, gas, water, wages and marketing. It can cover additional costs over and above what is normally spent, plus pay your net profit, to ultimately ensure you are compensated for your loss.
Without protecting your cash flow, you may be unwittingly putting yourself into a fraught financial position. With potential guarantees on your business or personally from banks, a business owner may be forced to sell and dispose of assets to maintain cash.
Other potential benefits in business interruption policies include coverage due to damage to utilities and thus no electricity or water being supplied, access to your premises being stopped due to damage to surrounding shops in a shopping centre plus many other examples.
In general terms, there are two methods to insure Business Interruption. Based on insuring Gross Profit (which includes costs and net profit), there is the:
- Traditional Business Interruption method, or
- Standalone method
How this can effect a claim settlement is major.
The traditional method will have the following conditions:
- Co-insurance or average Insurance applies, i.e. claim penalties for underinsurance.
- Claim payment deductions (e.g. casual wages, light, power, etc.) for variable costs not incurred.
- An indemnity basis of settlement
- Insured as part of another policy
- As Indemnity period increases over 12 months, Sum insured increases in proportion, thus, Cost increases.
- Timing of Claim Payments negotiated as costs incurred, or turnover reduced.
The standalone method provides:
- No Co-insurance or average insurance clause
- No deductions for savings
- An agreed value basis of settlement – providing greater certainty
- Insured as a separate policy
- As Indemnity period increases over 12 months, Sum insured does not need to increase; thus, the cost is far more competitive.
- Timing of Claim Payments made weekly and agreed as costs incurred
Clients generally insure the traditional method as this is what nearly all the market offers.
A hypothetical business insurance interruption example is provided.
For a no-obligation quotation for your business interruption insurance, please contact us on (07) 3139 3900, or complete our online form.