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What is Business Interruption Insurance?
Preparing for the unexpected is part and parcel when running a small business. You may have insurance to help protect your premises, contents, or stock. You might even have coverage for mistakes and other problems with your work.
But have you thought about what would happen if your business operations were seriously interrupted? Would your business survive a temporary closure? Could you keep it afloat for days, weeks, or even months while things get put back to normal?
Business Interruption insurance* provides cover for the loss of income and increased costs of operating your business caused by a specified insured event (such as property damage or fire). It is also designed to assist your business in recovering from an insured event by paying ongoing expenses (such as wages or rent).
Business Interruption cover is optional protection available when you choose to take out a Business Insurance policy.
Many business expenses continue even if you are forced to close your doors for a few days, weeks, or months. Ongoing costs like rent, utilities, and staff wages could strain your bank account while you’re getting your business back up and running.
Business Interruption cover helps pay these bills, as well as additional costs you may suffer as a result, such as needing to rent a temporary workspace while yours is being repaired.
Did you know?
When disaster strikes, disruptions to your ability to continue trading as normal could be more devastating than the event itself. Business Interruption insurance is designed to help your small business rebuild and recover by providing compensation for insured events.
What does Business Interruption cover?
Business Interruption insurance can help create a financial safety net, so you can focus on rebuilding your business instead of worrying about paying bills or where your income will come from.
These policies typically cover:
- Loss of turnover due to damage to your own premises because of an insured event
- Additional costs of working
For your small business, this could mean paying ongoing expenses like rent or utilities. It could help you cover payroll, so you can retain staff during the closure. Business Interruption might also cover the cost of renting a new temporary location or relocating your business entirely.
Events that could trigger a Business Interruption claim include:
- Extreme weather, such as storms, lightning strikes, hail, or floods
- Flooding caused by burst, leaking, or overflowing pipes
- Fire damage
- Theft or burglary
- Glass breakage
- Accidental or malicious damage
Small business owners in New Zealand can also select optional cover for natural disasters, including earthquakes.**
What is not covered by Business Interruption cover?
While Business Interruption insurance could help protect your small business, there are limits to the cover it provides. A Business Interruption policy typically does not cover:
- Undocumented income
- Voluntary closures
- Losses caused by labour strikes and changes in legislation
- Losses beyond the indemnity period
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Who needs Business Interruption insurance?
There are many types of businesses that could benefit from having Business Interruption cover.
Unforeseen events could completely devastate your ability to trade as normal and might even bring your small business to its knees.
Weather events can damage your property or delay shipments of stock. Floods or fire damage at your premises could mean relocating your entire business. A stolen car smashing through your shopfront might require you to close your doors until repairs are finished.
These are just a few of the many reasons why Business Interruption insurance might be necessary for a small business. Without the protection it provides, small business owners could find themselves paying out of pocket for ongoing expenses and additional costs. In extreme cases, they may even have to shut their doors for good.
If you’re unsure if Business Interruption cover is right for your business, it may help to ask yourself these questions:
- Do I have enough money on hand to meet my financial obligations if an insured event pauses my business operations? – Some bills don’t stop even if you’re forced to temporarily stop trading. Consider if you could continue to pay rent, wages, loan repayments, and other expenses during a closure.
- How long could I continue to pay the bills while I’m out of business? – It’s common for small business owners to underestimate how long it will take them to rebuild their business after a major insured event. The “indemnity period”, or the amount of time you’ll be covered for loss of turnover, that you choose could make a big difference to whether you are able to survive a shutdown or not.
Business Interruption Insurance for Small Businesses
Businesses that often consider this type of insurance include:
- Shop Owners
- Cafés and Restaurants
- Tradespeople and Landscapers
- Real Estate Agents
- Beauty Salons
- Mortgage Brokers
- Travel Agents and Tour Operators
Business Interruption cover could play an important part in helping you manage potential risks to your small business.
How much does Business Interruption insurance cost?
Business Interruption cover is optional protection that can be added to a Business Insurance policy. There are many unique factors that are considered when calculating the cost of Business Insurance, including:
- The type of business you run and the services you provide
- Your annual turnover
- The number of staff employed
- Your history of insurance claims
- How much cover you want or need
Comparing quotes can help you get an accurate idea of how much Business Insurance that includes Business Interruption cover will cost for your business.
*This information is a general guide only and does not take into account your objectives, financial situation or needs. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice. BizCover Limited is owned by BizCover Pty Ltd (ABN 68 127 707 975)
**Cover for natural disasters is subject to the location of your business and is not available to all postcode areas. Sub-limits and conditions apply. Refer to the policy wording.
Visit our Contact Us page, where you can find out how to get in touch with one of our business insurance professionals.
You can also access quick links to our self-service portal, where you can download your Certificate of Currency, update your payment details, amend your cover and download your policy documents.