The Insurance Council of Australia has stated that up to 70% of businesses fail if they did not insure, or fully insure, for business interruption following a substantial loss such as fire, flood or a severe health issue.
Business interruption insurance not only covers the loss of gross profit, but it also protects business owners from ongoing costs that can occur until the business is back on its feet trading again at the same profit level as before the interruption.
Business Interruption insurance is optional and so is often overlooked by business owners or bought ‘grudgingly’ as it an additional policy outside of standard business insurance package.
“Peter Vickers Insurance Brokers works with its clients to help educate business owners on why business interruption insurance is so crucial,” Simon Pilbeam, head of PVIB explains.
“Aside from loss of revenue, a business may still be required to pay ongoing costs including staff wages, utility bills, rent for alternative premises, or even legal and reputational expenses in the event of a major cyber event such as a data breach. Investing in the cost of a business interruption policy could result in avoiding paying a hefty price later on.”
Peter Vickers Insurance Brokers works with a client who owns a printing shop, with 5 industrial printers and a large client book. The client initially only took out basic cover but after a building a strong relationship with our brokers, understood the importance of having a risk professional on his side. Our experts would often visit the client to continually assess his risks and help to advise how best to prevent any insurance claims that could arise, and to keep his premiums low.
It became apparent that these the printing business was our client’s livelihood and generated the family’s sole income. We advised the client that in case a significant event, causing the businesses to cease trading – such as a fire, flood or theft – the business owner and his family would not be able to manage the continuing costs that would still be incurred.
On day one of the main printers short circuited, due to a manufacturing fault, and caught fire. Employees evacuated but the fire quickly spread before the fire services arrived, causing severe damage to the property and equipment. Our client had to cease trading whilst the shop was being repaired however as the business was not operating there was no income – yet there were still bills to pay and a list of orders to complete for clients.
Fortunately, all costs were covered under the clients business interruption insurance and they were able to pay their staff, honour their contracts with their suppliers and make up for the money they would have made had none of this happened. In addition, the business interruption insurance covered the client being able to use the facilities of another printing shop to continue to provide services to clients who had previously made orders.
While this outcome was very positive for our client, it is important to remember that this was a complex set of circumstances and a unique situation. Had it not been for the client’s broker working for them to drive the claim, the owners may have been without compensation and support for longer or even not at all. Having a broker who understands your business inside and out and works with you to ensure you survive setbacks like these is invaluable.
If you're a business that uses technology for everything from e-commerce through to point of sale, cyber insurance is also worth considering. Cybercrime is growing at an increasing rate in Australia and there are aspects of cyber that are not covered by standard business insurance. Here are the 5 reason’s SME’s should be considering cyber insurance.
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