News

Is your Business Interruption cover adequate enough?

News >> Business Insurance

Watch out for shortcomings in your Business Interruption cover

Business Interruption remains the most undersold but vital cover to include in a Business Pack or ISR policy (Section 2 Consequential Loss).

But problems exist even when an Insured has chosen the cover. Have they set it up correctly? Will it respond adequately after a material damage claim?

I just want to touch on a few areas that can cause shortcomings in the cover.

  • Indemnity Period – most people have not factored in a long enough period. Remember this cover provides for the difference in the turnover normally generated from the continual operation of your business and the reduction suffered following a fire until you return to normal levels. Most insureds pick only twelve months when they should look at least two years. Why? Consider the following:
    • After a fire – there is a period of investigation before allowing debris to be cleared
    • New plans or designs incorporating the latest regulations an by-laws will take a number of weeks
    • Plans then need to be submitted and approved by local councils which can take a number of months
    • Then when approved. A builder needs to be found or possibly a Project Manager. These are not instantly available and depending on the state of the economy and building demand can take many months to arrange.
    • Delays can be created through industrial action, weather related events, shortage of labour and building supplies
    • Then it is time to move in and wait for your customers to return
      • There is an additional cost of working to advertising that you are now back in business to the general public
      • There is still a period while you are re-establishing the business back to normal earnings which can take a while allowing also on the time of year and seasonal nature of your particular business.
  • Additional Increased Cost of working – touched on in the previous point, Is either ignored or not adequate enough. They are the extra costs needed on top of normal expenses needed to mitigate the loss and are vital to keep your business functioning. Examples are as follows:
    • Advertising to customers your new location
    • Finding and fitting out alternate premises if available
  • Claims Preparation Costs – these are sometimes overlooked because the Insured considers it relatively easy to prove their loss to an insurer. It is not always. The onus is always on the Insured to prove their loss. This means that an Accountant or other specialist is needed to prepare the claim and continue to monitor the shortfall in turnover. If there remains a dispute, even more Fees and expenses can be incurred. Therefore a reasonable sum needs to be established and included on the policy.

So in conclusion, it is important to review these critical areas of your Business Interruption cover as sadly recent claims have shown them to be inadequate in many cases. We strongly recommend increasing an Indemnity Period to at least two years, making sure the Additional Increased cost of Working limit is set at least 20% of the Gross Profit Sum Insured and Claims Preparation Costs are at least 10% to 15% of the Gross Profit Sum Insured. It does not cost too much more for this extra Peace of Mind. 

Last changed: Aug 19 2011 at 8:52 PM

Comments

  1. None Found

Add Comment

Latest News

Robert Cooper - one of 100 faces of small business

This week it was announced as part of Small Business Week,  that Robert has been named one of the 100 faces of small business for a State Government promotion on the great value that small businesses play in the State of Queensland.

You can see Robert's entry here:

It is the third accolade for CPR Insurance Services in a month and after seven and a half years in business is a real pep up for the company.

For Robert, it is the culmination of many years experience, becoming well qualified, experiencing the highs and lows of a career and always wanting to contribute to his community. Sometimes, these things just come together and you receive recognition for your efforts.

Robert says that there is no doubt that starting your own business is a huge challenge, but with the right research and planning, the right people around you and a good set of values that you apply to the vision of the company, you have a very good chance of making it all succeed.

Robert says he is lucky. He has a strong supportive Wife, Mandy, who is also part of the business, along with efficient and hard working staff such as Julia McLauchlan and Aidan Harmer who are building up their own skills in a learning environment. 

However, the most important and most supportive people for CPR Insurance Services are our clients who have stuck by us and supported us over the past seven years. Our focus remains on providing the best possible service we can and always acting in their best interests. To all our clients, we say thank you!

read more

CPR Insurance wins Brokerage of the year

CPR Insurance Services picked up the award for the Best Brokerage (1-5 staff) in Australia, last Friday Night (4th May 2018) at the Insurance Business Magazine Awards held at the Westin in Sydney.

Judging came from various parts of the industry. It is a great honour to be recognised for our hard work and particular Business values we follow. A full list of winners is listed here.

Success comes from having great staff, and we thank Aidan Harmer and Julia McLauchlan as important support staff for helping us win such an award.

CPR Insurance has been in operation for more than 7 years now and is only successful because of the wonderful support from our staff, insurers and most importantly, our fantastic clients who put their faith and trust into our company to be their Risk Advisers and Brokers. 

Thank you to all.

read more