Affinity Insurance Services Pty Ltd Services

Business Interruption Insurance - Alarming Statistics 

What is Business Interruption Insurance

Business Interruption Insurance is a type of Insurance Policy available under most business insurance policies and some farm insurance policies. Most business and farm owners understand that they need to insure their equipment, plant, machinery and stock. They know that if there is a fire in their building, they are very likely to loose that equipment, plant, machinery or stock. What business and farm owners cannot see is the consequences of loosing that item on their regular income.

Example, a small kitchen manufacturer has installed a Computer Aided Granite Benchtop Cutting machine valued at $300,000 imported from Germany. The new item when purchased took 3 months to arrive and one week to install. 6 months later they suffer a small fire caused by an electrical fault. Thankfully the fire is extinguished, however, the fire damaged the machine beyond repair. What are the consequences of this fire other than an additional $300,000 to replace the item? (Assuming the Australian Dollar and Deutchmark are still the same values!)

 - 3 months of downtime on a critical item of plant

- Possible loss of contracts

- Increased costs to have a competitor fullfill outstanding contracts

- Long term loss of confidence in client base, clients may have built relations with a new kitchen maker.

- Decision to pay the wages of the machine operator for 3 to 4 months or dismiss and replace the machine operator (possible unfair dissmissal?)

These are but a few real examples this business would face in this circumstance. What is common to almost every claim is an increase in production costs, and a decrease in sales revenue. A policy can be tailored to suit any business circumstance including those businesses that would not suffer a downturn in sales but only increased costs. Perhaps you have only one supplier or one customer, you can also insure your income that would be affected by a fire or loss to your supplier or customer premise.

 Would I need Business Interruption Insurance?

The simple answer to this question would be a yes in most cases, though you should call our office if you would like Personal Advice. Consider this:

Small to Medium Sized Businesses

- Is this business the sole source of income for you and your family?

- If the income stopped or slowed, how would you pay the rent or mortgage? Who will put food on the table? Who is going to pay for the kids health or school costs?

- Even if you do re-open the doors of your shop after a fire, where have your customers obtained their goods whilst you were closed? How will you get them back?

Large Business and Corporate Business

- How many staff do you employ? If your business was closed 6 months for relocation and fitout, would you continue to pay these wages? If no, how would this affect your standing in the local community in which you operate? Wages can be insured in this type of cover.

- How will your shareholders react when they see the news report that your factory has burnt down? How will your shares react? Would re-assurance of a business continuation plan and loss of income insurance be sufficient? Have you as a director taken every step possible to protect your stakeholders or will you be found personally liable for negligence?

How can I ensure my business interruption insurance limits are sufficient

Affinity Insurance Services have access to Business Calculator Tools specifically designed by Dr. Allan Manning of the LMI Group. These tools if completed correctly assist any business in making sure their Business Interruption Insurance Limits are sufficient. Contact any one of our offices to discuss how you can have your insurance program reviewed. 

Where can I get more information

You can find a grat deal of information on the LMI Group knowledge base. LMI Group are a Loss Management and Risk Management firm with extensive knowledge in commercial insurance claims.

 http://www.bicalculator.com/KC/kc1.aspx?id=3

Dont Risk it!   Every Business Needs a Broker !!