Business Interruption Insurance

Business Interruption insurance is designed to put the Insured business back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.

At Logical, we believe there is so much more to protecting your business than simply insuring your physical assets.

The owners, shareholders, and/or those that have provided investment finance expect an income stream that will cover the financing costs, the costs of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets, etc.

Think of how difficult the production and sale of goods and services would be without cash flow. Consider how complicated paying costs such as payroll, management & staff bonuses, overheads and expenses would be. In effect, without cash flow, making a profit is rendered almost impossible. Without cashflow your business may simply fail in the event of an insurable loss.

The unfortunate facts are that every year, 1 in 500 businesses will experience a severe disaster and approximately 70% of those businesses who suffer a major Material Damage / Business Interruption loss will disappear within 2 years of the incident.

Businesses failing can be due to a number of factors, including:

  • No BI insurance (approximately 42% of SMEs do not have BI Insurance);
  • It’s no coincidence that approximately 42% of SMEs do NOT survive a major Material Damage / Business Interruption claimable event;
  • Misconceptions of the type of cover provided;
  • Underinsurance / inadequate insurance (either Material Damage &/or Business Interruption). Of those SMEs holding BI Insurance, 40% were severely underinsured and 15% significantly under insured, which caused significant financial hardship for these businesses.

As can be seen above, many business owners wrongly assume they do not require BI insurance because they believe that a loss will ever happen to them. The reality is that fire and other insured losses occur every day to businesses.

The net profit and ongoing expenses including, payroll, management and other staff bonuses and financing costs are all regarded as insurable Gross Income or Gross Profit depending on the policy, but whatever it is called, these expenses should be insured. Without it your business may simply fail in the event of a loss.

Typically following a fire or other insured peril occurring at a business premises some form of interruption to the business occurs. This disruption results in a reduction in insurable Gross Profit. This loss of insurable Gross Profit can occur because of a reduction in reduction in turnover. In other words, a drop in sales will naturally lead to a loss of insurable Gross Profit.

Business Interruption insurance is designed to put the Insured business back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.

Get in touch with us today to learn more about how this vitally important insurance will help protect your business.

Logical has access to a Business Interruption calculator produced by BI specialists MSM Loss Management. The calculator is designed to help guide and assist your business to calculate adequate coverage. We encourage you to visit their website and calculator by clicking here.

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