Home' Trinidad and Tobago Guardian : September 26th 2013 Contents So how do you know if your
business can survive without
selling goods or services?
Well, a good starting point is to ask yourself
If I arrive at my business premises tomorrow
morning and find a pile of rubble where the
business used to be...what would I do?
For most people, the answer is usually along
the lines of, "I don t know, I really don t want
to think about it!"
Unfortunately for a large number of busi-
nesses, the fact that their premises are destroyed
also means their most important asset stops,
and that asset is:
• The business income
• The result of having no business incomer
usually means financial disaster and no more
There is not a business anywhere in the world
that would not at least incur additional costs
if trying to recover for a major loss.
So how do you determine what you need to
insure for loss of business income and/or other
If my business was unable to operate from
its current premises tomorrow, can it still pro-
duce income to pay for:
a) Loans, running expenses?
b) Staff wages? If you have good staff, you
want to keep them or they may start working
for your competition!
c) Production or purchasing of stock?
d) Your own salary that pays your private
bills such as mortgage, groceries and, most
importantly, your lifestyle?
If you are unable to operate your business,
will your customers or clients:
a) Understand you cannot supply them and
wait patiently for you to get your business back
up and running?
b) Come back to you from your competitors
once you are back up and running? How long
could that take?
Are you reliant on your site or equipment to
produce your income or can you operate from
a) If you are reliant on your site, for example,
a restaurant or café (people usually go to these
businesses because of where they are located)
you need to insure for loss of business income.
b) If your equipment is unique and difficult
to source easily and quickly e.g. a manufacturer,
you need to insure for loss of income.
c) If you are not reliant on your site to produce
your income as it is produced externally, for
example, accounts, insurance advisers, you may
not need to insure your income.
You will still incur additional costs in setting
up temporary operations elsewhere and these
costs should be insured.
What sort of events can lead to your business
income being affected?
The answer depends on the type of business
you have. However, the following is a list of
major events you can obtain loss of income
insurance to cover:
Fire and other perils, accidental damage,
flood, burglary or theft, stock during transit,
damage at customers and/or suppliers premises,
equipment breakdown, damage during the
course of construction.
Please note: you cannot obtain cover for all
of these under one policy and you should sit
down with a qualified insurance adviser to
ascertain what your needs are.
How long should you insure your loss of
In order to determine the answer, you need
to take into consideration a number of factors
that will relate to your particular circumstances.
Some important things to consider:
• Any regulations for rebuilding in your area.
Depending on the area you work in, it could
take a lot longer than you expect.
• It could take another one to three years to
rebuild your market share
If you are reliant on particular machinery
for your business, there can be significant delays
in sourcing replacement machinery, particularly
if it needs to be shipped in.
In short, you need to sit down with a qualified
insurance adviser and also an insurance valuator
who can help to give you a recommendation
on what length of time you need to insure for.
What types of cover are available?
The main types of cover available are:
Loss of income
Usually calculated by adding turnover + clos-
ing stock -- purchases + opening stock. The
figure also needs to be adjusted to take into
account growth trends in the business and the
amount of time the income is being insured
over. Policy definitions can vary, so a good
insurance adviser can assist you to get your
Loss of rent
Used by property owners to insure the loss
of rent if the building they own is damaged
and becomes uninhabitable. You can also insure
rent default by tenants as an extension with
Increased cost of working
Additional costs incurred, where spending
the money leads to a reduction in the loss of
Additional increased cost of working
Additional costs incurred to get the business
operating again, for example, hire of equipment,
hire of temporary premises, advertising, etc.
Claims preparation costs
The cost of your accountant and pother pro-
fessional persons being involved to support
Customers of suppliers premises
If you are reliant on a supplier for your stock,
then what happens to your income if that sup-
pliers premises is damaged or destroyed? Can
you source these goods from elsewhere to keep
generating your income?
The same questions need to be asked about
damage at your customers premises. If you
have a major customer who you rely on for a
large portion of your income, then what would
happen to your business if that customer s
premises was damaged or destroyed?
If damage at a customer or suppliers premises
could impact your business income, then you
should ensure you have cover for this scenario.
Provides you with cover for outstanding
amounts owing to your business by debtors to
the business where your records of the amounts
outstanding are destroyed in a fire, etc.
A good insurance adviser would also use this
section to have a qualified expert on loss of
income insurance claims assist you to make
sure you receive all you are entitled to.
As you can see, this area of insurance is
extremely important to every business. If you
do not currently insure your loss of income
and additional costs, please talk to a qualified
insurance advisor urgently and stop risking
A good starting point
It is critical that every business has some
contingency plans in place as to what they will
do in the event of the business premises being
destroyed or unusable.
The plan should address as much information
as possible on such things as:
• Where can you set up temporary opera-
• Is plant and equipment you need available
for hire until your equipment can be replaced?
• How will you notify your customers and
suppliers of what is happening and where you
• Are manufacturers of similar products also
able to produce your product for you at their
premises while you cannot trade?
• Who is responsible for doing what (each
role in the business) in the event of this type
• Can you source more products from sup-
pliers to keep trading?
In short, the more detail and effort you put
into the contingency plan, the easier it will be
for your business to be able to continue to trade
and survive at least in some way until your
building, contents and stock etc are replaced.
A business without a contingency plan will
find itself in a far worse position following a
major incident and may find it extremely difficult
Next week: Traps with insurance.
Mike Byrne, ACII, is the head of general
insurance at CIC Insurance Brokers Ltd. Feed-
BG20 | COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt SEPTEMBER 2013 • WEEK FOUR
Major disaster: Can your business survive?
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