Several weeks ago there was a large fire at an waste fuel depot in Adelaide that caused a significant amount of damage to the property. The fire took over 100 firefighters many hours to get under control. Luckily the surrounding properties got away with minimal physical damage.
But what was the true damage to these surrounding businesses caused by the fire?
There was a mobile food business that was on the news reporting that they were not able to gain access to their property for roughly 48 hours. Without power, all of their food in storage was destroyed and they were unable to obtain access to their vans. This means that a business that sustained no ‘physical’ damage was still tens of thousands of dollars out of pocket.
Being under-insured is a painful lesson to learn
The article goes along another line about the fine print of the policy, not paying out a claim for damage. Whilst this is technically correct, a business interruption cover could have alleviated some of the out-of-pocket expenses. Most insurers will offer business interruption cover for loss of income caused by restriction of access to their property from a ‘defined event’ that if insured under their policy, a claim would have been paid out.
In this example, if business interruption insurance had been taken out the business may have been able to recoup some of their income loss.
Businesses reluctant to take out Business Interruption Insurance
It still amazes me the number of businesses that do not take out business interruption insurance. Most businesses think that taking out property cover will be enough to survive a large incident.
However, what is not usually taken into consideration is the time and costs involved to get a business back up and running.
If you cannot trade as a business – you cannot earn an income. Unfortunately, this doesn’t stop the bills coming in.
Some questions to ask yourself if your business was to suffer interruption:
- Where will you get your income from?
- How will you attract your customers back when they have had to use the services of your competitors?
- What if you have to relocate the business to alternate premises?
- Who pays this cost?
Business interruption cover can pay these types of costs (and others) when you make a claim.
For the most detailed explanation on business interruption, please check out this website.
The lesson: it’s better to be over-insured than under-insured.