Business interruption (BI) refers to any event that stops a business from trading or generating an income. Typical examples include fire, flood, explosion, theft and looting/vandalism, as in the case of the widespread destruction that is sweeping across KwaZulu-Natal and some parts of Gauteng.
Business interruption insurance covers a business against the loss of revenue and helps it to get back on track in terms of paying overheads and expenses during downtime.
Traditionally, if you had a factory and it burnt down, there was a policy to cover the losses. In today’s world, many other factors that can cause your business to shut down. BI can be expanded according to one’s industry and business requirements, such as:
BI is a catastrophe type of risk, meaning that it doesn’t happen often, but if/when it does, both business owner and risk advisor need to ensure that they are prepared, and that the insurance policy will respond appropriately. Other catastrophe risks include damage to property and liabilities.
You need to consider all your risks and identify what can be managed and insured in your BI plan.
BI affects anyone who is in business, no matter how big or small. BI happens infrequently, but if it is not done correctly, it could affect the financial stability and ongoing viability of your business.
Not only do you need to know and understand your risks, but also those of your clients and suppliers. Ask yourself what do their business interruption plans look like, and what, from those plans, do you need to include and account for in your own BI plan?
Your BI plan should be revisited annually, or as your business changes – and with your risk advisor – ensure you are adequately covered and have considered all your risks efficiently.
These catastrophic events illustrate the importance of having a solid BI insurance policy in place.
