Cyclone Debbie: A case for Business Interruption Insurance
If ever there was a case for business interruption insurance it was in 2017 when cyclone Debbie ravaged through the Whitsundays, and left severe floods in her wake right down the Queensland coast into northern New South Wales.
Businesses not only suffered severe damage to their properties, but could not trade for months as repairs were carried out. In some cases, businesses were hampered for several months. Even 12 months later many were just returning to normal.
Few of the businesses severely affected actually had business interruption insurance which could have protected them from the loss of income that a business suffers after a disaster.
While property insurance covers the physical damage to the business, business interruption insurance covers the profits that the business would have earned if it were operating as usual. Business interruption is not sold as a standalone policy, but can be included in your comprehensive cover.
What does Business interruption insurance cover?
Business interruption insurance is not just about covering your business in the event of a natural disaster, but it could be invaluable in the event of a fire, or if a shipment of goods you’re waiting on was delayed for several weeks which impacted your trading, if you run an online business and have an internet outage for two or three days.
There are various scenarios in which it can be useful to have business interruption insurance. It will typically cover the following:
- Profit: Profits that would have been earned during the time that that business is out of action.
- Fixed Costs: Operating expenses and costs that continue to incur even though the business is not operating.
- Temporary Location: Expenses associated with moving to, and operating from, a temporary location.
- Disruption: Covering the costs associated with disruption caused by service providers including power, telecommunications and water.
- Extra Expenses: Cover for the reimbursement for ‘reasonable expenses’ (beyond the fixed costs) that allow the business to continue to operate while the property is being repaired.
Business interruption insurance is a worthwhile consideration. Always make sure you get professional advice and read the product disclosure statement so you know what’s included in your policy.
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