Imagine your business is running smoothly – booming even – and then, out of the blue, disaster strikes. Whether it be a fire, a flood, or even a global pandemic, your income suffers drastically, and all of a sudden, the future of your business becomes uncertain.

For some Australian businesses, this is an all-too-real reality during the most recent fire, storm and flood events. However, those who have Business Interruption Insurance have a fighting chance of bouncing back.

In this blog, we’ll explore how investing in this vital coverage can be your financial lifeline when the unexpected happens.

Use these quick clicks to find what you’re after:

What is Business Interruption Insurance?
Why every business needs Business Interruption Insurance
How much does Business Interruption Insurance cost?
What events trigger this coverage?
How long does this coverage last post-disaster?
What is a disaster recovery plan and how can it help?
How can Knightsbridge help?

What is Business Interruption Insurance?

Business interruption insurance helps businesses of all sizes recover financially when forced to cease or limit their operations due to disaster events such as fire, flood or storms. It can aid with ongoing expenses when you cannot continue business as usual.

It is usually part of your Business Insurance policy, which typically covers your premises, building contents, public liability and professional indemnity. Although you should always double-check this with the help of an experienced professional before assuming.

Those with this coverage should be well equipped to recover and rebuild post disaster. If you’re part of the unlucky percentage who don’t yet have it sorted, continue reading to learn more about the benefits, costs and other preparation strategies.

Why every business needs Business Interruption Insurance

“Natural disasters are increasing in frequency and intensity, with some small and family business communities describing a ‘rolling disaster’ operational environment” – Australian Small Business and Family Enterprise Ombudsman, Inquiry Report.

Natural disasters do not discriminate and can impact businesses of any size, scope or industry. Over the past five years, COVID-19 was the most common disaster affecting small and family businesses, with 90% of respondents struggling to stay afloat.

This was followed by heavy rainfall, mentioned by 16%, and bushfires, noted by 12%. Unsurprisingly, smaller businesses are far more likely to suffer financial loss, hindering their path to recovery.

Business Interruption Insurance is recognised as the top way you can prepare and protect your legacy for the unexpected. If your enterprise has recently suffered from a natural disaster event (directly or indirectly), here’s how your policy can help you bounce back:

Key Business Interruption Insurance benefits

Income Protection – your policy should cover the loss of income during a temporary closure, ensuring the business can continue to meet financial obligations (rent, utilities, payroll, etc.).
Operations & Customer Continuity – maintain daily operations and customer relations to reduce the risk of permanent closure.
Speedier Business Recovery – receive funds for immediate expenses and resume normal operations sooner.
Risk Mitigation – identify and reduce the risks associated with unexpected events, ensuring long-term viability.
Peace of Mind – focus on your core operations, knowing you are protected from whatever the Australian climate throws at you.
Tailored Solutions – your policy should be customised to suit your specific needs and budget.

How much does Business Interruption Insurance cost?

Business interruption insurance can cost anywhere from a few hundred to several thousand dollars per year. Similar to all business insurance policies, the expense is calculated based on the unique risks your business faces, including:

The size of your workforce
The nature of your business operations
Your business’s location
Your annual business revenue
Your track record of insurance claims

Overall, Business Interruption Insurance is very cost-effective for most Australian businesses, especially as it lays the foundation for financial stability in crisis scenarios.

Our trusted insurance brokers can break through the industry jargon and do the research for you to find the most comprehensive yet budget-friendly option for your business.

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What events are covered?

Here are examples of events that can potentially disrupt your business and activate the coverage provided by Business Interruption Insurance:

Natural disasters, such as storms, hail, fire, or floods
Bursting, leaking, or overflowing pipes
Burglaries or theft
Glass breakage
Accidental damage
Malicious damage

How long does this coverage last post-disaster?

When choosing your Business Interruption policy, you would have confirmed the indemnity period, also known as the period of restoration or liability. This outlines the maximum duration you can seek compensation from your insurer if your business faces unforeseen disruptions.

The typical options are 6, 12, or 24 months – however, it’s essential to make sure there are no extra waiting periods.

What is a disaster recovery plan and how can it help?

In Australia, where mother nature is unpredictable and relentless, a disaster recovery plan is a fundamental strategy to ensure your business can recover from a storm, cyclone, flood or fire. It’s not just about natural disaster preparation – it’s a vital step of responsible and sustainable business management.

Studies show that while most company owners feel somewhat prepared for future disasters, only one in four have an updated response plan – while a whopping 50% have no plan at all.

Even if your physical premises remain unscathed, you could still fall victim to supply chain issues and power or network outages, throwing a costly spanner in your daily operations.

“This causes challenges for businesses that may have diversified their operations and ‘gone digital’, as online consumers often expect immediate responses and service, and may not be aware of telecommunications challenges faced by small and family businesses following a natural disaster” – Australian Small Business and Family Enterprise Ombudsman, Inquiry Report.

How to create a reliable disaster recovery plan

Identify potential risks specific to your business, considering natural disasters, cyber threats, and other potential disruptions.
Calculate the financial and operational impact of downtime for your critical business functions.
Establish clear recovery goals, including recovery time objectives (RTOs), and define what “recovery” means for your business.
Create an inventory of necessary people and resources for recovery, including staff, equipment, data, and communication tools.
Develop a clear-cut strategy for each critical function. Consider backup systems or alternative work locations.
Record a detailed yet easy-to-follow step-by-step procedure for implementing these recovery strategies.
Communicate and test these procedures with employees, stakeholders, and suppliers in case of a disaster via multiple platforms and methods (face-to-face, email, print diagrams, etc.)
In addition to your own plan, ensure that your suppliers have compatible disaster recovery plans in place.
Always check your legal and regulatory requirements, especially in highly regulated industries.
Regularly review and update your plan to adapt to changes in your business, technologies, or risks.

BUSINESS INTERRUPTION CALCULATOR

Don’t leave the future of your business to chance

At Knightsbridge, we’re dedicated to finding the most cost-effective, comprehensive insurance solutions tailored to unique needs. We don’t give up until we reach the most favourable outcome for your business. Call us on 1300 527 4343 now or submit an enquiry online to secure the best business interruption insurance policy.

Recover, Rebuild, Rise: The Power of Business Interruption Insurance