What is Business Interruption Insurance? 

Business interruption, also known as Loss of Profits or Consequential Loss Insurance, is a special insurance cover. It pays the business owner any fixed overheads and similar business costs following a fire, storm damage or other major events that prevent a business from trading. This insurance starts from the time of the fire until the business is back up and running to where it was before the damage occurred.  

Why is Business Interruption Insurance important?

Starting and running a business always carries risks. The key financial risks can be managed by buying insurance cover like Property Damage, Public and Product Liability, and Burglary. 

For businesses of any size, Business Interruption Insurance is essential to ensure that money continues to be received (from the insurer) to pay fixed expenses – such as lighting, power, bank loans, wages, transport, plus net profit related to a reduction in turnover.   

What does Business Interruption Insurance cover?

Business Interruption Insurance compensates business owners for:

• net profit expected to be earned during the time the business takes to get back up and operating to its pre-loss output
• any fixed expenses (interest on loans, wages etc.), that keep on being incurred, regardless of whether the business is operational or not. 

Variable expenses, like input purchases and delivery costs, would not be covered, as they won’t continue if the business isn’t operational and making goods or products. 

The time period for getting the business back up and running to pre-loss levels (plus any expected growth) may take a few weeks or many months, depending on how badly damaged the business was, the loss of customers, and other factors. Working out the maximum time you need insurance for is important – but 12 months is a good place to start.

Choosing your insurance policy

Key factors to consider when choosing the basis of cover, which will impact your premium, include:

• Indemnity period. How long do you need the cover for? Depending on the situation, how long will it take your business to return to pre-loss trading? 
• Payroll. How much of your payroll do you need to insure and for how long? Insurance companies won’t pay employees to sit at home for six months while the business is being rebuilt, but redundancy payments can be insured.
• Growth. Consider the trends in your business: is it growing rapidly, or is it a mature business?
• Economic cycles. Are there any major seasonal fluctuations or economic cycles?
• Suppliers and customers. Do you need to cover specific customers or suppliers that you rely on. If they couldn’t operate, would it impact your business?
• Additional or increased costs of working. Most businesses spend a lot more money in the short term to try and minimise the impact on their business. For outsourcing a valued customer's work to another business for a short while, or if you own a building that’s fire damaged when your business is located, and you need to rent premises for manufacturing, this will be a new additional cost of the rent.

Frequently Asked Questions 

●    How Is It Calculated?

There are two main ways to purchase this type of insurance:

1. Weekly income or Sales
2. Annual gross profit (being 12 months turnover less variable expenses, also insuring net profit).

Does it cover loss of profits for services firms?

For example, solicitors, investment consultants, and medical or dental practices. As many of these businesses can continue to operate from home or serviced offices, gross profits are generally not insured, only additional or increased working costs.

However, businesses that depend on their specific location, such as dentists or allied health, that have their customers in a specific area may consider Gross Profits Insurance. 
 
In Summary

Storms, natural disasters, and fires are regular occurrences in Australia. Major interruption to business, where there is no income for an extended time, is one of the most significant risks a business will face, regardless of its size or industry. A large percentage of businesses that don’t have Business Interruption Insurance never reopen. It’s difficult to pay employees or mortgage costs, suppliers or even the power bill if there is no sales or revenue. 

In addition, trying to get your business back on its feet can be overwhelming – taking management’s focus away from day-to-day business, as well as placing significant financial strain on you and the business.

We can help you find the best cover to keep your business running as smoothly as possible.

What is Property Insurance? 

Property Insurance covers the loss or damage to physical property after an insured event or peril, such as storm damage, fire, or impact from a truck. It’s often sold as part of a package – for example, together with Farm, Home, or Business Insurance.  

This type of insurance provides property owners with financial security and peace of mind – knowing that if the worst happens, like a fire or tree falling on your home, your financial loss will be minimised. 

What does Property Insurance cover?

Most properties can be insured – as long as you fully disclose your occupancy situation and the purpose of the property. Property Insurance covers personal property (such as your home), the household contents, and valuables like jewellery or sports equipment. 

This can be a:

• residential property
• farm
• unit
• strata building
• commercial strata
• retail store
• factory
• warehouse 
• manufacturing facility.

Loss or damage insured

All property policies cover specified perils, such as:

• fire
• theft
• storm
• rain
• wind-related events
• impacts by vehicles and trees
• vandalism

You can also add a cover at an additional cost for other accidents, like shelves falling or stock being damaged by a pipe leaking.

As with any type of insurance cover, Property Insurance policies have limits and exclusions. The limits may relate to the total amount payable in the event of a claim, the location where the property is insured, or how your claim will be paid out. Typical exclusions include damage by insects, pre-existing damage, intentional damage, lack of maintenance, and flood. 

Choosing your insurance policy

Choosing the right Property Insurance can be challenging as there are a few different packages:

• Home Insurance – includes cover for the house, contents and personal items taken outside the home.
• Farm Insurance – covers farm property. This can include the homestead, contents and personal items, also stables, barns, out-buildings, fencing, plant & equipment and grain in silos or livestock.
• Business Insurance – covers buildings, stock, contents, plant & equipment, and work in progress.

It’s essential to read and understand your insurance cover. Talk to your insurance adviser if you have any questions or don’t understand your insurance arrangements. We can provide you with advice on the best cover to suit your financial situation, needs and objectives.

Frequently Asked Questions

What insurance is best for a property? 

Choosing the right property insurance can be challenging, as there are lots of different types, including Personal Property, Home, Farm, Business, and Stock. The cover also varies between insurers – some will only offer specified perils, while others will also cover accidental loss or damage. Other factors to consider include the use of the property, whether it will be renovated, value, and key risks in your area.

Why do I need property insurance? 
Property Insurance is an easy way to manage your financial risk. When you buy insurance, you have protection against unexpected events damaging your property, such as fire, storm, or burglary. In exchange for an annual insurance premium, the insurance company promises to pay you in the event of loss or damage occurring. If you have no insurance, then you’ll have to pay for any loss, damage, or repairs from your own pocket. This is difficult to budget for, and may be outside your ability to pay.
 

What's the difference between homeowners insurance and other types of property insurance? 

All Property Insurance covers buildings, contents, and specified types of property. The use of the property usually tells you what type of property package you need:

1. Home Package – covers a number of sections, like public liability, glass and property (such as the home), contents, and personal valuables like jewellery. 
2. Farm Package – covers public liability and motor vehicles, with the property section covering the homestead, farm buildings, fencing and farm machinery. 
3. Commercial Package – usually covers theft, machinery breakdown, legal liability and property. Property for a business includes stock in process, finished stock, buildings, plant and equipment, and office contents.

What isn'tcovered by property insurance? 

Property Insurance cover differs from one insurer to another, so it’s best to review your policy and make sure it covers most of your risk exposures. In many cases, Property Insurance has limits on the amount per accident or per item. Certain types of damage may also be excluded – for example, flood damage in certain areas, leaving the home unoccupied for a long time, or bushfire damage in fire-prone areas. 

It’s worth taking time to read and understand what your insurance policy does and doesn’t cover. Your insurance adviser will make the whole process easier to understand.

What are the basic types of cover needed? 

Property insurance covers a wide range of events. The seven key ones are:

1. Fire
2. Storm
3. Impact By Falling Trees Or Vehicles
4. Wind
5. Vandalism
6. Explosion
7. Burglary

Other types of cover can be added – so speak to your insurance adviser to ensure you have the right cover in place.