Starting a business is a huge achievement, while the greatest challenge is to sustain and develop it. One of the most important business conversations an entrepreneur can have is with a professional risk advisor who can objectively interrogate the nature of your business, its unique needs, reliance on its supply chain, the range of likely risks and how to mitigate the impact of such in a worst case scenario. Many businesses have the usual property and assets cover for their buildings, vehicles and other essential equipment. All good and well if you have an accident, theft or fire and your policy is able to take care of the replacement of the physical assets, but what happens if you are also unable to trade for weeks, even months and your revenue declines or even stops altogether as a result? If the only road to your luxury B&B in the Drakensberg is blocked off for a month due to a landslide or sinkhole, how would you recoup the lost income of no guest bookings? If your fast-food franchise burnt down and it took three months to rehabilitate the site and rebuild the store, how would you pay staff, rent, taxes, franchise fees and so on? If a multimillion Rand, imported machine in your component factory explodes and the replacement from overseas is three months down the line, how will you pay your creditors? None of these costs stop simply because you’re unable to trade due to a physical disaster or force majeure. Businesses can purchase contingent business interruption coverage, an aspect of business interruption insurance, where the insurance is triggered by property damage at the premises of a supplier or customer, or other trigger such as loss of utility, denial of access or the act of a local authority which results in a financial loss you may suffer. The intention of Business Interruption insurance is to restore the business to the same financial position as if the loss had not occurred as well as to cater for additional increased costs/ expenses incurred to minimise further loss of revenue and lessen the time to do so, subject always to the terms and conditions of the policy. Business interruption claims are normally linked to material damage/property damage. While your property or assets insurance covers the damage to physical property or equipment and replaces the actual assets, business interruption is vitally important to tide your business over in terms of the lost income as a result of physical damage, until you get back to operating your business as usual. What does Business interruption insurance cover? Although the specifics of cover vary from one insurer to another, the basic tenets of BI are:
Finally, it’s important to engage with a qualified, expert broker who can assess how your different business insurance covers mesh together to create a veritable safety net against the many challenges besetting SMES. Business Interruption cover is simply one of a number of important risk products that businesses need to safeguard their continuity. A clear description of a business and its operational environment is central to the drafting of a well-conceived insurance strategy. A comprehensive risk assessment will greatly aid in identifying the potential hazards, in addition to determining what physical precautions and management processes should be in place. It’s also very important to have an accurate assessment of the replacement costs of buildings, contents, vehicles, IT, stock and other assets, particularly in the event of a catastrophic loss. By linking professional advice to an aligned insurance program that covers virtually all the ‘what if’ scenarios of not only physical damage, but the knockon implications for business continuity, Aon clients get to experience the real depth of value of a comprehensive risk analysis backed with professional advice and expertise. Let us assist you do a risk assessment for you or your business contact Jan in our Short-Term Department; email shortterm@daberistic.com, tel (011)658 -1333 Source: Cover magazine Comments are closed.
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January 2025
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