The recent Christchurch earthquakes have thrown the spotlight on insurance and many business owners have been caught short with inadequate business interruption (BI) insurance.
Given recent events, it may be a good time to examine the state of your insurance cover bearing in mind some of the following points:
BI insurance covers financial loss (short term) arising from the closure or interruption to the operation of your business from damage caused to the business, business premises or your stock etc.
It is important to check the wording of your policy carefully as there may be exclusions that mean you will have no cover for damage or interruption caused by certain events e.g. flooding etc.
What extensions do you require? i.e. extra cover.
The purpose of BI insurance is to return your business to the same financial position it was in prior to the damage and interruption.
You should check your policy carefully with respect to what you are actually covered for – for instance loss of profit and other reasonable costs and expenses.
What is your total level of cover – is it sufficient?
What is the period of cover? (often referred to as the indemnity period). This period commences from the date of the damage and ends when your business is up and running and fully functioning, or when the set indemnity period in the policy ends, whichever occurs first. The danger is that if you have a set indemnity period that is quite short then your business may not be operational again before this period ends, in which case you will have no cover.
The above points are only general in nature and when looking to take out BI cover, or analysing your existing policy, it is important to take professional advice as to your particular circumstances and requirements.
Our thanks to Jared Cains for writing this article