Business interruption insurance 'critical' in preventing loss of profit

Insuring the physical assets of a business is only one part of making sure it is covered in the event of loss.

When a disrupting event occurs, such as a fire, business property insurance may be called upon to replace or repair buildings. Other covers can help to replace contents, stock, vehicles and machinery.

But while all this is happening, the business isn't running - what happens to the profits? How are employees paid?

Business interruption insurance is there to cover the loss of profit suffered while a business gets back on its feet.

And yet, many Australian businesses don't have it, says John Azpiri of Elders Insurance in Townsville, and if they do, they aren't insured to a sufficient degree.

According to this north Queensland insurance specialist, this is a major cause for concern.

He says that the downtime following a major loss while a business is being reinstated can be "critical" and that the majority of businesses simply don't get back up and running.

This is why having cover in place to make up for a loss of profit can help a company stay afloat.

Mr Azpiri stresses that business interruption insurance doesn't just cover loss of income while operations are suspended, but it extends right up until the business is trading at the level it was prior to the event.

This can be invaluable, as even though a business may have replaced lost assets, it can still take time to regain the position and profits it had established.

Business interruption insurance is designed to keep a business trading in a variety of circumstances.

These include an onsite occurrence, an event in the vicinity of the premises that prevents access, interruption of services from public utilities, interruption at suppliers' or customers' premises and closure by government authorities.