Is your Business Income Insured?

I liken Insurance to backup. Whilst you can’t insure your data (I did look this up once and some policies gave did indeed give you a small allowance for lost data) you can secure it should the ultimate or even semi ultimate disaster occur by backing it up both locally and offsite.

This week’s post however isn’t so much about backing up your data, it actually has nothing to do with data at all. It does however have to do with securing your business and what can happen when you neglect such things. This story is a true story of a small business owner that I know personally who like most small business owners has always made enough to feed the family but never too much more. They have always owned a small business of some sort and technicalities like insurance have never been a big consideration.

The business is a fresh fish store in the northern suburbs of Melbourne (yes another relative of mine). They have been successfully (not overly) operating for over 10 years. The store has never been closed. With 2 part owners, any holidays that they have taken they have been able to balance missing staff by urging an older child the help out for a few weeks. Typical family business.

About 6 – 8 weeks ago, the shopping centre they were in caught fire. The damage was extensive enough to require further investigation by the insurance company and other authorities. Whist all of this was going on the businesses in the section that was damaged had to be closed. Centre Management first assured them it was a couple of weeks. It would all be over and then they could get on with what they did, making a living.

Turns out that the section of the building that was damaged also had Asbestos throughout it. In order to complete the repairs, the asbestos had to be removed. This saga has now been going on for close to 8 weeks (if not longer). This small business has not been able to operate for this period. They have had no income. Worst still is that they had no insurance to cover the lost income. This means that the bills associated with living have continued but the income to cover the bills hasn’t.

Small Business Insurance

Centre Management might not be charging them rent for the period that the store has been shut but it is little consolation when their income has reduced to ZERO and their customers have been sent elsewhere to buy their fresh fish. Surely most of them will return but will they all? If they find prices cheaper at their new supplier they might just stick around.

Taking a  quick look at Business Insurance policies out there, a basic retail store policy would have covered there guys in this event. NRMA for instance (Google it and came up first), has a retail store policy which would have covered them in the following events:

• Fire, storm and other defined events (including malicious damage) – this is common cover for a small business. It’s an obvious choice for fixed premises to cover equipment or stock.

• Business interruption – you are covered for loss of profits if your business is disrupted by damage to your business property caused by specified events.

Here are some case studies that NRMA have on their site: http://www.nrma.com.au/business-insurance/case-studies.shtml

I am not sure what the cost of this insurance would be. Dare say it would be a couple of thousand per year but given this small business has been out of work for close to two months, surely it would have been worth it. Once and if they are able to get over this event and restart the business again, insurance is likely to be one of the first things they look into.

When it comes to backup disasters, it tends to follow the same pattern. My computers are new, and I have a system to store it all locally. Then one day it stops working or a disaster strikes and you lose it all. The IT technician comes and tells you about offsite backup and you wonder why you never invested in it from the beginning. Then you do. It could have however have all been easily avoided. Yes hindsight is great but somethings are common sense or atleast should be.