The Overlooked Safety Net – Business Interruption (BI)
Failing to plan is planning to fail. Even the most careful preparation cannot prevent every disruption. For businesses, unexpected events can halt operations and damage income. This is why a strong risk management strategy is essential – and a vital part of that is Business Interruption cover (BI).
What is Business Interruption (BI) cover?
Business Interruption cover is designed to help businesses recover financially when operations are disrupted due to unexpected damage. Events such as natural disasters, fires, riots, or political unrest can cause serious losses beyond physical damage.
Imagine your retail building supply store is damaged in a riot, and stock is looted. Insurance may cover the cost of replacing stock, but what about the income lost while your shop is closed for weeks of repairs? That’s where BI cover steps in – compensating for lost income and keeping your business on stable financial ground.
This makes BI cover an essential element of any commercial insurance portfolio.
What Does Business Interruption Cover?
- Fixed Expenses: Rent, utilities, and property taxes still need to be paid, even when your doors are closed. BI covers these costs.
- Lost Profits: Protects the revenue you would have earned had operations not been disrupted.
- Extra Costs: Covers additional expenses like renting temporary premises to keep trading.
- Essential Services Disruption: Compensation if utilities such as electricity or internet fail due to an insured event.
- Supplier or Contractor Damage: If a key supplier suffers damage and can’t deliver goods, BI insurance may cover your resulting financial loss.
Not all policies are the same, it’s important to review your cover carefully to ensure you have the protection your business needs.
Are you correctly insured?
Three key factors determine whether your business interruption cover is fit for purpose:
- Sum Insured
Calculated on insurance gross profit, not accounting gross profit. This requires expert understanding of your business’s financials and operations. - Indemnity Period
This is the time needed for your business to fully recover after a major event. It should reflect:
- The complexity of your operations
- Lead times for machinery or stock replacement
- Seasonality in sales
- Industry competition
- Business Continuity
While not insurable, risk management and continuity planning directly affect your insurability and premium costs. A single catastrophic event in one division could disrupt your entire network, staff, suppliers, and customers.
Don’t Wait Until It’s Too Late
Believing “it will never happen to me” is risky and irresponsible. South Africa’s volatile environment demands careful planning.
At SDC Wealth Management, we help businesses tailor insurance solutions to protect against the unexpected.
Book a no-obligation review today to ensure your business interruption cover truly protects you when you need it most.
