In Case of Emergency – Creating a Business Protection Strategy

There are various methods and protection strategies which can help protect your business from unfortunate happenings. In order to devise a precautionary strategy that will prove beneficial to you and your business in the unlikely event of unsettling circumstances, you must first consider your employees, the debts your business has and insurance you may need if difficulties eventuate in an emergency situation – inclusive of life threatening conditions.

In case of emergency, we asked a leading and trusted business insurance broker in Melbourne how to create a business protection strategy. We hope you find this information useful, however, we recommend you seek further professional advice from a trusted adviser with regards to your individual business’s needs and concerns so a tailored business protection strategy and solution can be devised.

Business Interruption SafeGuards

One of the biggest challenges facing any business in any disastrous event/s, is businesses not having adequate business interruption insurance or an up to date business continuity plan. This is a must for any business, regardless of size as it acts as your fundamental business protection strategy.

Interruption Insurance, also known as BI is one of the most important classes of insurance any business can purchase. The most common queries received from clients in relation to BI are, what exactly is it; and in practice how does a claim get calculated and settled? Basically, we deem this cover as “life insurance for your business”.

In theory, if a business or organisation suffers disruption caused by an insured event that negatively impacts cash flow and/or profitability, BI protects the organisation by continuing to pay the net profit, as with all ongoing fixed expenses which can include but are not limited to the following:

  • Financial costs such as lease payments, hire purchase and mortgage repayments
  • Payroll costs including WorkCover, PAYE, payroll tax and superannuation contributions
  • Rent and other fixed outgoings
  • Insurance – income protection, life insurance and general insurance policies
  • Utilities such as gas, electricity, communications and water charges
  • All other expenses of the business that will continue during the period of disruption

Fundamentally, the principle behind BI is to put the business back into the position (or as near as possible) that would have been experienced had the loss or disruption not occurred. The policy responds by covering the cost of outgoing expenses to the business, plus any “increased costs” the business incurs as a direct result of the disruption.

Leading business insurance specialists consider BI as a vital class cover, necessary to protect all businesses. The statistics for businesses who do not purchase BI show a reported 80% enter into administration within 12 months of a major loss or emergency situation.

Determine Your Business Insurance Needs

As the business owner, you should know or learn what cover is adequate for your business. The insurance policy you choose will make the difference between security against unforeseen losses and paying such losses out of your own pocket. If you don’t think that the premium you will be paying outweighs the losses and risks you may face in the event of an emergency, then you may resist getting business insurance. However, bear in mind the losses incurred, if unprepared, will have disastrous results.

You must not only consider the amount of insurance you want to have, but also what is insured if there’s an unfortunate event leading to loss. To gauge the insurance with the possible loss, there are five key factors that are usually the basis of all insurance claims:

  • The Person – Is the person involved in the injury included in the policy?
  • The Property – Is the property you are making a claim with included in the list of properties declared?
  • The Peril – Is the cause of loss covered in the policy?
  • The Exclusions – Is the cause of the loss excluded in the policy?
  • Conditions – Does the cause of loss or accident meet the conditions or under any limitations under the policy?

Each question must be considered when determining what type of insurance you wish to take out. With this knowledge in mind, you can then ask a financial adviser for insurance that fits your needs and budget. You can also ask what strategy is needed so you can get the most out of your insurance.

In case of emergency, it pays to have the right business insurance or BI in place acting as your business protection strategy, otherwise your business could be left exposed.