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Business Interruption Insurance

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Frequently asked questions about business interruption insurance

Business interruption insurance is one of the most common policies businesses take out to protect their operations and continuity. Let’s delve into the most frequently asked questions.

Business Interruption Insurance Requirements and Coverages

Business interruption insurance isn’t a one-size-fits-all policy. Here are four key sections which shape the coverage and the requirements.

What Does Business Interruption Insurance Cover?

Business interruption insurance covers lost income and increased costs of operation resulting from an event such as a fire, flood, or earthquake that disrupts the normal functioning of your business. This can also include expenses like employee salaries and rent, even while your business isn’t operating as usual.

Who Needs Business Interruption Insurance?

Any business with a physical location and tangible assets can benefit from business interruption insurance. These assets could be machinery, stock, or even business records. The policy helps businesses to weather the financial storm that follows a disruptive event.

What is Not Covered by Business Interruption Insurance?

It’s crucial to note that business interruption insurance doesn’t cover every business loss. For instance, it doesn’t cover losses due to market competition, general economic downturns, or losses from non-physical damage like reputational harm or loss of contracts.

How is the Coverage Period Determined?

The coverage period, often known as the indemnity period, is the length of time for which benefits are payable under a business interruption insurance policy. It starts when the physical damage occurs and ends when the damaged property is physically repaired and returned to operations under the same conditions that existed prior to the event.

How to Buy Business Interruption Insurance

How Long Does It Take to Buy Business Interruption Insurance Through Gerrards?

We, at Gerrards, can get multiple quotes from top insurers in 24 hours or less. We guide you on coverage limits and the best fit for your business, and once you’ve made your choice, we can send you the insurance certificate.

What is a Business Interruption Insurance Certificate?

The insurance certificate is a document that proves your business has the required insurance coverage. It details the type of coverage, policy number, insurer, policy period, and the limits of coverage.

What Industries Can Gerrards Offer Coverage For?

We cater to all industries. Every business has unique risks and requirements, and we’re here to tailor a policy that best suits your specific needs.

How Much Business Interruption Coverage Do I Need?

Determining the right amount of coverage depends on factors such as your business size, industry, and location, among others. It’s best to get a broker to review your financials and calculate the amount from there. There are many things that can trip you up such as insurable gross profit being different from gross profit.

Business Interruption Example & Claims

How Do I Make a Business Interruption Insurance Claim?

If you need to make a business interruption claim, you can contact us directly. We’ll deal with the insurance company for you and advocate on your behalf, making the process as smooth as possible.

What Are Some Common Business Interruption Examples?

A clothing retailer experiences a severe fire in the storeroom, damaging a large portion of their stock. The shop had to close for repairs, and the business interruption policy helped cover lost income and repair costs.

A flood causes extensive damage to a manufacturing plant’s machinery. The business interruption policy covers the loss of income during the period it took to replace the damaged machinery and resume production.

An earthquake damages a popular restaurant in Wellington, forcing it to close for repairs. The business interruption policy covers the costs of temporary relocation to keep the business running.

An unexpected power outage in a large supermarket results in the spoilage of fresh produce and frozen goods. The supermarket is forced to shut down for a few days to restock and ensure all electrical systems are functioning correctly. The business interruption policy covers the lost income during the closure period and the cost of restocking spoiled goods.

Over the weekend, a furniture store is vandalized, causing extensive damage to both the storefront and several expensive furniture pieces. It takes a week to repair the store and replace the damaged items, during which the store has to be closed. The business interruption policy covers the loss of income for the week and the costs associated with the necessary repairs and replacements.

Is Business Interruption Insurance Worth It?

Like any insurance, the value of business interruption insurance depends on your business specifics.

Pros: It can provide critical financial support following a catastrophic event, help maintain cash flow, and even save your business from bankruptcy.

Cons: It’s an additional expense, and the pay-out depends on the specifics of the event and the policy details.

Business Interruption Insurance Policy Changes

What Happens if I Need to Change My Insurance Later?

If your business circumstances change, you can adjust your business interruption cover to reflect these changes. Always communicate any changes in your business operations to ensure your policy remains relevant and provides adequate protection.

What Happens if I Cancel My Business Interruption Policy?

If you cancel your policy, your business could be left vulnerable to potential disruptions. It’s important to weigh the risks carefully before deciding to cancel.

Compare Business Interruption Insurance with Other Policies

Business interruption insurance and loss of business income insurance are often used interchangeably. They refer to the same type of policy designed to replace lost income and cover extra expenses when a business is unable to operate due to a covered event. So whether it’s termed as ‘business interruption’ or ‘loss of business income’, the intention is the same – to keep your business financially stable during periods of unplanned disruptions.

Building insurance and business interruption insurance protect different aspects of your business. Building insurance covers physical damage to your property from events like fires, storms, or vandalism. It helps you repair or rebuild your business premises. On the other hand, business interruption insurance supports your business operations, covering loss of income and increased costs of operation when a covered disaster disrupts your business. While building insurance helps you fix the physical damage, business interruption insurance helps ensure that the financial health of your business is preserved during this period.

Material damage insurance is a policy that covers physical loss or damage to your business’s assets, including buildings, stock, and equipment. It ensures you can repair or replace these assets if they’re damaged by events like fires, floods, theft, or vandalism.

In contrast, business interruption insurance comes into play after the incident, covering the loss of income due to the interruption caused by the event. For example, if a fire damages your stock (covered by material damage insurance), the time you need to source and replace the stock and get your business back to its usual operation would be covered by your business interruption insurance. Both types of insurance work together to provide comprehensive coverage for your business – one for the physical assets and the other for the ongoing operational costs.

Do you have further questions about business interruption insurance nz?

We hope this guide has shed light on the intricacies of business interruption insurance in New Zealand. However, we understand that every business is unique, and you might still have questions specific to your situation. At Gerrards Insurance Brokers, we’re here to help. If you have any further queries about business interruption insurance, or any other insurance need, please don’t hesitate to contact us. Our team of experienced professionals is always ready to provide personalised advice and solutions tailored to your business. 

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