Business Interruption Insurance exists to help your business recover after such events occurred. This type of insurance protects your business against loss of revenue during the time that you may not be able to supply goods and/or services to clients and will ensure that you can continue paying overheads and expenses such as rent and salaries during the period that you are closed. With Business Interruption Insurance, it will be possible for your business to return to the same financial state it was in before the incident occurred.
Business Interruption Insurance should be a prerequisite for any company and is vital for the continuity of your business. Simply having Business Interruption Insurance is not sufficient. As business owner, you should make sure that your cover will not fall short when you require it most. If your cover is not adequate, your business may not survive being closed for an extended amount of time. To prevent this, here are 3 common issues you should be aware of:
- Choose an adequate indemnity period
The indemnity period is also known as your recovery period and should allow enough time for the reinstatement of your office, as well as the commissioning of new equipment, machinery, and anything else you need to run your business.
This period should be long enough for your business to return to the same production and turnover levels that you managed to achieve before the incident.
- Know the difference between Financial Gross Profit and Insurance Gross Profit
Financial Gross Profit concerns your company’s direct manufacturing costs. Some examples would be electricity and water, factory expenditures and wages. Insurance Gross Profit, on the other hand, concerns uninsured costs identified by the business owner. By basing your Insurance Gross Profit only on uninsured costs, the rate of your Gross Profit will be higher, enabling you to pay ongoing expenses.
- Miscalculating Gross Profit
With Business Interruption Insurance, you are insured against applying the rate of Gross Profit to the reduction of turnover, not the total decrease in turnover.
- Incorporate VAT
- Show a 12-month period in which the maximum indemnity period is a total of 12 months or less
- Cater for increasing costs during the insured period
Estimating exactly how much cover your business requires against Business Interruptions is a calculation that could prove so critical, that your business’ survival could prove dependant on it. Reach out to our team if you would like an independent determination of your insurable risk. Contact our team directly or find out more on https://www.mmsgroup.co.za/consulting-services/.
What is Procurement Fraud?Procurement fraud affects both public and private sector organisations. It involves taking advantage of the payment system to receive illegal payments during...
In the face of the everchanging digital space, MMS Group endeavours to provide meaningful management consulting services to enhance and enable business success. In line with this...
Unfortunately, modern-day digital channels have left many businesses vulnerable to fraud. With online fraudsters usually one step ahead of most fraud detection tools, businesses are now...