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 Home & Contents Insurance? 

For many Australians, owning a home is a dream come true. After years of working and saving up, we all look forward to the day when we can live under a roof that we can proudly call our own. So, it’s important to get the right type of insurance to ensure our financial security and peace of mind.

Home and Contents Insurance covers the cost of repairing or replacing your house and your belongings when something goes wrong – like a fire, burglary, or a visitor getting injured. It also offers financial protection in case of disasters like severe storms or an earthquake. Our beloved homes can even be damaged by trees falling or hail damaging roof tiles. 

Why is Home & Contents Insurance important?

Our home is often our largest asset, so having the right insurance cover can really help if the worst happens. The insurer can arrange repairs or rebuilding and pay the costs of moving temporarily and putting contents in storage if the house is so badly damaged it can’t be lived in. They’ll also pay legal defence costs and damages awarded by a court if someone is injured on your property. 

Contents Insurance is usually purchased along with cover for the building. So for example, if the roof is damaged in a storm and water causes damage to the interior furniture or clothes, it’s all covered by the same insurance company. 

Having the incorrect type of cover could mean you have to find the money to pay for these things yourself. Banks and finance companies also require Home and Contents Insurance when you borrow from them.

What does Home Insurance cover?

Standard homeowner’s policies typically cover a list of insured events, including:

• fire and smoke
• storm
• cyclone
• rainwater
• explosion
• burglary
• vandalism. 

Other insurance companies offer more than the standard cover – for example, accidental damage, motor burnout, and artwork or valuables taken outside the home. It’s also important to compare insurance policies as they vary considerably. Some cover damage to retaining walls, landscaping, and flood and water leaks, while others don’t.

Checking and understanding what is covered and what isn’t (often called an 'exclusion’) is key to understanding the insurance you purchase. Some items also have limits – for example, jewellery may only be covered up to $1,000 per claim, unless items are specifically listed.

Choosing your insurance policy

Before you buy insurance, we recommend checking:

• Cover type – is it a standard cover (listed events) or accidental damage cover?
• Will the home be your main residence or a holiday home?
• How much cover is there for jewellery or special items?
• Have you used a free online calculator to find out the rebuilding cost of your home and the replacement value of the contents?
• Do you need cover for bikes or other sporting equipment?
• What is the condition of the home? Most insurers don’t pay for water leaks from cracked tiles or rusted gutters.
• The location of the home – is it in a flood or bushfire-prone area? Some insurers may not cover certain streets or suburbs.

At Insurance Advisernet, we can help you ensure the valuation of your home and contents are up to date. Our professional advisers will also discuss your needs and advise which insurer and type of cover best suits your situation and budget.

Frequently Asked Questions

●    How much does home & contents insurance cost? 

The typical cost of Home & Contents Insurance, as well as the cover, varies across Australia. The monthly average is around $110 in NSW and $100 in Victoria, while in Queensland, it can range from $120 to $360 per month for Far North Queensland. This is why it’s worth getting quotes from different insurance companies and for different levels of cover. 

Premiums are generally based on:

• location
• what the home is built of
• the age and type of occupancy
• past claims experience.

Is home insurance mandatory?  

No, but banks or finance companies will require Home Insurance to ensure you can have your home repaired or rebuilt if damaged. It’s also common sense to make sure your most valuable assets are protected in the event of storm or fire.

●    What areas are covered in a typical Home & Contents policy? 

There are typically three areas covered by a homeowner’s insurance plan:

1. Building – covers the house and any carports or garages, as well as the fixtures and fittings, like pipes and carpets. Basically, this is for anything that you wouldn’t take with you when you sell the home. Some policies cover any type of accidental damage, while others more limited (and cheaper) cover for fire and listed perils, including wind, rainwater and storm damage.
2. Contents – covers anything you would take with you when you leave, such as rugs, furniture, beds and sporting equipment.
3. Valuables – generally only provides very limited cover for jewellery, bikes that are taken away from the home, and artwork. So, it is important to understand the difference between insurance policies and what suits you. 
    

How much Home & Contents insurance do I need? 

Everyone’s situation is different, but some major factors to consider are the square foot measurements of the house plus the construction costs to rebuild damaged or destroyed houses. With Covid related shipping delays and inflation, the replacement costs of both the home and contents have increased 10% to 25% over the past year, so it’s essential to get advice and check with an up-to-date online calculator. If you don’t have enough insurance cover, you may end up paying for part of the repairs, which could be expensive and delay the work.

What is SME Business Insurance?

Any business in Australia, including small to medium-sized businesses, will benefit from an added layer of financial security in the form of an SME Business Insurance cover. This provides owners and businesses with protection against financial risks and the loss of key assets. It also protects customers, employees, suppliers, and contractors.

Some types of insurance are mandatory, like Workers' Compensation, Professional Indemnity, or CTP Insurance for motor vehicles – these are called statutory insurance covers. Other types of insurance are optional, but they are important ways of reducing business risk and protecting your finances and assets.

What does SME Business Insurance cover?

• Property Damage – cover ranges from fire, storm, lightning and other perils to any type of accidental loss or damage. The property insured includes damage to buildings, contents, stock, plant and equipment, raw materials, and consumer goods.
• Business Interruption – covers weekly amounts or net profit loss and ongoing fixed costs following property loss or damage. Also referred to as Loss of Profits or Consequential Loss Insurance.
• Burglary/Theft - covers break-in at the business premises and the damage is done, as well as theft of goods or stock;
• Money - covers theft of money in various locations (during transit, in a locked safe, or in a private residence) at any time (within and outside business hours). 
• Liability - covers a variety of statutory and civil legal liability, including personal injury and property damage, environmental liability, management liability, statutory liability, professional liability, aviation, marine and motor vehicle-related liability;
• General Property - covers specified portable property against accidental loss or damage once it is taken off the premises, within Australia or overseas; 
• Equipment - covers sudden internal derangement and accidental loss or damage to plant, equipment and machinery, as well as computer and other electronic equipment. Loss of stock and business interruption cover can also be part of this insurance. 
• Motor vehicle & mobile plant – covers registered and unregistered motor vehicles, mobile plant & equipment, farm equipment, construction plant, as well as attachments and trailers. This insurance can also cover loss of income, downtime and hire costs of replacement equipment. 

Speak to an insurance expert

It is our business to understand your objectives, needs, financial situation and risk profile and provide you and your business with tailored risk and insurance advice. 
This is how we work with your business:

1. We analyse your objectives, needs, financial situation and risk profile to develop appropriate strategies and solutions. 
2. With your input, we undertake risk assessments and conduct market research to determine the most suitable insurance product(s) for your key risk exposure. 
3. Your insurance adviser will present appropriate strategies and solutions and also negotiate and place insurance covers agreed.
    

Frequently Asked Questions

• How can insurance help small businesses in Australia? 
  • In Australia, small businesses are encouraged to invest in business insurance to help protect their business from costly eventualities like damage to property and liability claims. Investing in a comprehensive yet affordable insurance policy promotes the continuity of the business in times of losses or great financial trouble. 
• What does SME stand for? 
  Small-to-medium enterprises (SMEs) are businesses whose revenue, number of employees and assets do not exceed a certain threshold. Each country or industry defines a set of criteria to determine whether an organisation falls under the SME category.
• How can insurance help small entrepreneurs or SMEs, or how it relates to risk management? 
  Risk transfer is one of the treatment approaches in managing risks in business, and insurance is an example of risk transfer. It’s a strategy that SMEs employ to shift a risk or a liability from one party to another when that party specialises in managing a specific kind of risk/liability. 
• Why is insurance important for business owners? 
  Getting an insurance policy for your business is important, as it cushions or completely shields you from the hefty costs of certain unforeseen issues (accidents, damages to properties, effects of force), legal claims, and other liabilities. Without insurance, business owners might be forced to foot the bill out of their own pocket.