As a business owner, you rely on the steady source of income that your regular business operation provides. So what would you do if your business was suddenly unable to operate? If you’d struggle financially during a pause in your business, that’s where business interruption insurance comes in. When it comes to commercial insurance, business interruption insurance is one of the most important forms of cover that you should consider – here’s why!

What is business interruption insurance?

A lot of businesses assume that property and contents cover is sufficient to protect themselves from the financial impact of an unexpected event such as theft, storms or fire. While it’s true that these policies will cover the cost to fix the damage, it doesn’t offer protection for the period during which your business can’t operate. For example, after serious water damage, you could be unable to enter your business premises for some weeks. Business interruption insurance will cover the financial losses that directly result from the interruption in your business operation.

What does business interruption insurance cover?

Unless you’re in a very fortunate financial situation, most businesses would be seriously impacted financially if you discovered you couldn’t operate following an insured event such as fire or flood. Business interruption insurance takes the pressure off and covers a range of costs, including:

  • Profits that you would have been earning during the time your business was unable to operate;
  • Temporary relocation to new premises while the damage is being fixed;
  • Rent costs, staff wages and other operating costs while your business isn’t able to operate;
  • Additional disruption costs as outlined in your Product Disclosure Statement (PDS).

How do I calculate my business interruption insurance?

When you decide to take out business interruption insurance, underinsuring yourself defeats the purpose of this cover. To ensure you have enough cover, estimate the length of time you’d need to be covered for in a worst case scenario. For most businesses, this would be around 12 to 24 months. You then need to estimate your expected gross profits over the indemnity period, along with factors such as staff wages, rental costs and moving costs. This will give you an idea as to how much cover you’ll need. Your insurance broker will be able to help you ensure that you’ve calculated enough cover for your business.

At GSK Insurance Brokers, we understand the importance of having all of your areas of risk covered with the right insurance. Our brokers understand the changing risk environment which modern businesses face and we help evaluate these risks while finding insurance solutions which fit your needs. Whether you want commercial property insurance, business interruption insurance, liability cover, or any other form of business insurance cover, our brokers can help.

For commercial property insurance brokers, contact GSK Insurance Brokers today on (08) 9478 1933.

July 12, 2019

By Graham Knight

Founder and Managing Director of GSK Insurance (established in 1981). Graham draws upon more than 50 years’ experience in the insurance industry, working in both insurance and broking across various private, public and government sectors in Australia.

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