When setting up insurance for a new client, a common question asked is ‘what is business interruption cover? And do I really need it?’
Business interruption insurance covers the loss of income that your business suffers after a disaster such as a storm or fire occurs. Its purpose is to protect your gross profit and help you to pay your ongoing costs until your business in back up and running and generating the same gross profit as it was prior to the major disaster. The income loss covered may be due to disaster-related closing of the business facility or for the process of rebuilding after the disaster.
What is typically covered by Business Interruption insurance?
Profits – profits that would have been earned during the period of closure are based on prior months’ financial statements
Fixed costs – Also based on prior months financial statements, the operating expenses and other costs still being incurred by the property.
Temporary location – Some policies cover the added expenses of moving to and trading from an alternate, temporary, location while repairs are conducted.
Extra expenses – reimbursements for reasonable expenses that allow the business to continue operating while repairs are conducted.
Civil authority ingress/egress – government-mandated closure of business premises that directly causes loss of revenue. E.g. forced closure due to governments-issued curfews or street closure related to a covered event.
The coverage of Business Interruption extends until the end of the interrupted period, which is determined by the insurance policy. Most policies define this period as starting on the date of the disaster until the damaged property is physically repaired to operations and in the same condition that it was in prior to the disaster.
Every Business Interruption Policy is different. While the typical coverage listed above is generally true for most policies, you need to research and determine what policy and coverage best suits your needs. Business Interruption cover is a must for all businesses. The interruption to your income and trading following a major disaster can often have serious and ongoing financial implications for your business.
Ask yourself a question, can your business survive without any income?
Active Insurance Solutions specialises within the fitness industry, so contact us today to make sure the income from your gym, studio or fitness centre is protected in case of an unpredictable disaster.