The Importance of Business Interruption Insurance in Australia
While natural disasters are part and parcel of living in Australia, recent devastating bushfires, floods, and cyclones highlight the need for risk mitigation for all Australian businesses.
There are a number of different types of insurances that can help businesses recover from disasters, and while most will be aware of the importance of property and contents insurance, business interruption insurance can also provide valuable assistance.
Research by the Insurance Council of Australia has estimated that 43% of uninsured or under-insured businesses that incur a significant insurable loss fail within the following year1.
The Insurance Council of Australia’s data has also shown that the 2022 flooding event on the country’s east coast was the most expensive in the nation’s history, resulting in an estimated $3.35 billion in insured losses from 197,000 claims2.
These numbers highlight the importance of considering overall risk factors that can affect your business, as well as the potential limitations of building and general insurance lines in some circumstances.
As the end of the financial year approaches, it is an opportune time to assess the current state of your business and identify any changes in its needs. For example, if you operate a manufacturing company, you may have experienced disruptions due to damaged road or rail networks affected by severe weather events which has limited your business’ capacity. Or your business may have invested in new infrastructure that has become essential to your operations and you’d like to ensure that you have a policy in place to ensure ongoing capacity or output.
In such scenarios, business interruption insurance can support the recovery of your business. It can cover the financial losses resulting from a temporary closure due to a natural disaster but may also offer additional benefits depending on the policy wording. These benefits can include coverage for relocation costs, loss of turnover, and the ability to meet ongoing and additional business expenses.
Not all business interruption insurance policies are created equal: some policies may only cover specific types of natural disasters or have limits on the amount of coverage provided. It’s important for business owners to carefully review their insurance policies to ensure they have adequate coverage in the event of a natural disaster.
In addition to business interruption insurance, there are other steps businesses can take to prepare for natural disasters. This may include developing a disaster recovery plan, implementing emergency procedures, and regularly reviewing and updating insurance policies to ensure they provide adequate coverage.
In summary, business interruption insurance can be an important risk management tool for businesses in Australia. It can provide financial support to help businesses recover from unexpected events and resume normal operations as quickly as possible.
Consult with Aviso Broking to assess your business interruption insurance needs and ensure comprehensive protection against the risks of natural disasters.
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