Do you know how much your business would be out of pocket if you couldn’t operate for a day, a week, a month, or longer? Did you know that business interruption insurance can cover those costs while you’re out of action due to an incident?
Most small and medium businesses make sure they’re insured for all the usual risks like fire, theft, vandalism, storm damage, fraud, and even professional misconduct. But the one aspect that is often overlooked is the losses your small business could face if you can’t operate while your premises are being repaired or your equipment is being replaced.
Even though you’re covered for those incidents, often, your policy will only cover the direct cost of repairs. That’s why your small or medium business needs business interruption insurance. It makes up the shortfall in income that can occur when you’re out of action.
To get the right business interruption insurance, it’s advisable to speak with an experienced small and medium business insurance broker that specialises in business interruption insurance.
Often, small and medium businesses weigh up the cost of insurance premiums against their cash flow or revenue and elect to self-insure. Unfortunately, this often means small and medium businesses are underinsured. Finding this out when it’s too late, after an incident has already occurred, can be devastating. So it’s important to check your insurance coverage to make sure you’re covered for business interruption.
Even when your business can’t operate due to an incident such as a fire, your employees still need to be paid, you need to service your debts, and you may need to reassure your creditors that you’re not going anywhere.
Even if you have enough insurance to cover the cost of repairs and replacements, the losses you suffer while you’re out of action could be severe enough to put your small or medium business at serious risk of insolvency.
Business interruption insurance avoids this, ensuring you have the funds you need to keep meeting all of your financial obligations even if your business isn’t generating an income.
Business interruption insurance can be complex, even if your small or medium business is relatively simple. So it’s important to speak with a knowledgeable broker who can help you identify the right policy for you.
NZbrokers is a network of insurance brokers with extensive experience in business interruption insurance for small and medium businesses, and we have a broker close to you.
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If the cost of not being able to operate for a few days or longer doesn’t seem that worrisome to you, it’s worth considering the hidden costs for small and medium businesses that are temporarily out of action.
One hidden cost is the risk that your previously-loyal customers will go elsewhere. After all, if your bakery can’t provide their weekly bread, for example, they will just go to a different one. And, they may find the other bakery just as good or convenient as yours. In that case, they may not see any value in returning to your bakery even when you’re back up and running. This means you’ll lose their revenue not just while your bakery is closed for repairs but also in the future.
Furthermore, if you can’t pay your staff members when they’re not working, they may find themselves faced with no other choice than to look for another job to make up the shortfall in their own income. They may not be prepared to return once you’re back up and running, which means you’ll need to go to the expense and hassle of finding new staff. If your current staff members are valuable and skilled, replacing them may be easier said than done.
And, if you can’t pay your creditors while your business isn’t operating, they may or may not be willing to give you an extension. However, this could potentially strain your working relationship and make it hard to get access to finance in future.
If you can make up the lost revenue while your business is out of action, pay your staff their weekly wages, and meet your debt obligations without having to ask for help, then your business will be in much better shape to get straight back to normal when your premises are ready for action once again.
In fact, business interruption insurance could arguably be the difference between your business being able to get back up and running or not.
Getting the right cover for your small or medium business might be complex but it is essential, so you need to talk to an expert.
Working with an independent, transparent insurance broker like a member of NZbrokers means you don’t have to spend time and resources investigating all the options and hoping you don’t miss something. Your broker will be able to find the right cover for you and you may even end up paying less than you think for better cover.
Contact one of our independent brokers today to find out more.
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