Things To Consider When Insuring a Business

Below are just a few questions to take into account when considering the insurance program for the business.

• In the event of a major loss, do you have the cash reserves to meet the ongoing expenses of the business while the damaged assets are being replaced or repaired?


• How much money would you need to have available to carry you through the re-establishment phase?


• How would your customers react to you being closed or unable to supply?


• Would your bank or other financiers expect loan repayments to be made even when you are not able to trade?


• What is the lead-time on replacement equipment and stock? Do not forget to allow for research. Manufacturer, delivery and installation.


• How long to you think it would be to have your property claims assessed and paid? Consider police investigations, assessors, forensics, agreeing scope of repairs / replacement, obtaining tenders, repair period, etc. In a major loss, 3 months is not unusual. Having Interruption Insurance in place assists in keeping this time frame to a minimum, and allows you to claim for loss of insurable gross profit during this period.


• What could be done to speed up the recovery process? How much does it cost, and can you afford to fund this expense yourself?


• How would your lease respond to a major loss? Are you locked into paying rent again as soon as the landlord’s building is repaired and ready for occupancy? If you have temporarily moved to new premises, how much will it cost to move back? How much further disruption to the business will there be?


• If you lost a customer or customers during the period of disruption, how long would it take for you to replace them? Interruption Insurance, subject to the length of cover you chose to take, will continue to pay any loss or insurable gross profit and increased costs of working until the business is fully returned to normal trading levels.


• What would you do with your staff? Many people simply say that they would dismiss their staff. However, after a loss occurs, you may well need them to assist in the recovery process. Can you do it all on your own? Can you continue to fund the wage costs? There are numerous issues to consider. For example, employees are generally the most important assets of the business. Have they served the business well? How would you like to be treated if the situation was reversed? What is the cost of recruiting and training new staff? Do not forget the current level of low unemployment! Would your competitors have a double win by recruiting your staff with all the training and knowledge you have imparted? Can you fund the retrenchment program, including the outstanding annual leave and long service leave entitlements? The reality is that most losses are partial losses, and businesses often need more staff, not less, to keep the business going as work-around for the loss of the machinery. With a well designed Interruption Insurance policy, the costs of continuing to employ staff or paying out the severance pay (‘time in lieu of notice’ component) is covered.