Even thriving businesses can face a major setback at any time. If you have an equipment malfunction or a critical supplier goes under, would your business survive? That’s why business insurance is so important, as it covers lost income and continuing expenses after a disruptive event. You can rest easy knowing you have a business continuity plan in place so that you can recover from even the worst disruptions.
What is business risk management?
Businesses are incredibly diverse and are exposed to a range of risks. That’s why it makes sense to work with a knowledgeable broker who works with you to understand your unique exposure. They can then tailor-make insurance solutions to match these needs. This can be put in place with a business risk management plan to protect your assets, reputation and livelihood.
In one recent case, a restaurant kitchen burnt down and the business was forced to close for an extended period. Even though it received no income while renovating and repairing the damage, overheads such as rent, electricity, water, salaries and payments to suppliers remained due at the end of each month.
This could easily ruin a business. However, the restaurant owner had business interruption insurance in place and could claim for the loss of income and renovations. (Get more details about tailored hospitality insurance.)
Customer-facing businesses may also want to consider business liability insurance, to manage the risk of your business being taken to court. For instance, a professional services firm might be sued for negligence, or a construction business held liable for shoddy work. Even if you aren’t at fault, dealing with legal challenges such as this can be hugely stressful and time-consuming.
Manage your business risk
It’s also important to understand how you can reduce your business risk to avoid disruptive events in the first place.
- Keep workspaces clean and uncluttered
- Train staff on basic firefighting
- Store documents and equipment safely
- Ensure electrical wiring and equipment are maintained
- Keep a fire extinguisher on the property
Of course, some events are outside anyone’s control - and that’s why the right insurance is so important.
What does Business Interruption cover?
Primary cover typically protects your own premises against events such as fire, lightning strikes, severe weather damage and power surges. Cover for losses linked to damage at your key suppliers’ or customers’ premises is usually available as an extension and needs to be specifically added to your policy.
Business interruption cover usually applies when your business is affected by physical damage, such as fire or storm damage, to your own premises. If you’ve added the relevant extensions to your policy, it can also cover disruptions caused by physical damage at the premises of key suppliers or customers. For example, if a fire at a supplier’s warehouse delays the delivery of essential equipment, this interruption may be covered. Some policies also offer limited cover for specific non-damage events, but this only applies where it is clearly stated in your policy.
Contingency Business Interruption Cover
Some policies also offer cover for certain non-physical disruptions to your business. For example, tourism or hospitality businesses may experience cancellations following an animal attack. This type of cover is subject to limits, including a maximum sum insured of up to R57.5 million (including VAT) or your Gross Profit, whichever is lower, and a maximum indemnity period of three months. Always check your policy wording to understand what applies to your business
As an example, in 2023, a Mauritius beach resort had to close for three months after an outbreak of Legionnaire’s disease, resulting in a US$250,000 claim.
Understanding prevention of access cover
Sometimes your business premises are unharmed, but you are still not able to access the property due to a fire, flood, fallen trees, or collapsed bridges. This is exactly what happened to one business owner during the 2022 floods in eThekwini. They were unable to access their hillside premises for 12 weeks, even though the property itself was undamaged, as the only road was washed away.
Review your business insurance cover to avoid being caught short
One of the simplest ways of mitigating risk is to review your insurance cover regularly and update it when needed. If you do this once a year, you have peace of mind that your venture is protected against potentially devastating financial losses.
At Santam, we believe insurance should be tailormade to your needs, rather than the other way around. You work hard for your business - and so it’s only fair that your insurer works hard for you. Get the peace of mind to focus on growth, knowing we’ve taken care of the risks.
Get an initial online business insurance quote today. An advisor will contact you to finalise your quote based on your unique needs.