The small business sector has been hit hard by the coronavirus outbreak as lockdowns, social distancing, and consumer concerns about the future keep customers away. Does the solution lie with your business insurance? Let’s look at some key issues.
Could your business insurance offer a financial lifeline?
First up, to be able to make a claim, you need to have cover in place already. Your SME can’t buy coverage now and expect to make a claim for a pre-existing business loss.
From here, it’s a case of knowing exactly what you’re covered for.
If your business has been forced to close temporarily – even if it’s driven by a government mandate, you may not be covered by your insurance.
Most policies offer protection only if the premises experiences physical damage – as was the case for many businesses during the bushfire crisis of last summer.
Moreover, as a rule, insurance doesn’t normally offer protection against biosecurity emergencies or pandemics – both of which describe the Covid-19 crisis.
Unfortunately, business interruption insurance may be equally hard to claim. That’s because the remote nature of the virus makes it difficult for businesses to demonstrate a direct link – even though it may have a direct impact.
What to be aware of
Many SMEs are asking their employees to work remotely. This makes it worth looking at whether your business is covered for cyber risk. Home computers are unlikely to have the same rigorous protections as your business network.
Key person insurance is worth a look
If a member of the Royal family can catch the Covid-19 bug, it’s a sure sign none of us are immune. So it is important to address the issue of key person insurance.
This type of cover protects a business in the event that a lead person in the organisation such an equity stakeholder or key employee dies, is unable to work again or suffers a serious trauma such as cancer.
When this happens, it can affect the profits, revenue and expenses of your enterprise – and even the ability of your business to win new customers.
The payout from key person insurance will never replace the loss of a leading individual but it can cushion the financial blow to your business.
Trade credit cover can offer protection
Trade credit insurance is one type of cover that may be able to help your small business navigate the Covid-19 outbreak.
It kicks in when one of your SME’s main customers can’t pay their outstanding invoices, which may easily apply in the present environment of uncertainty.
This type of cover can potentially be purchased right now. Be aware though, in these unpredictable times premiums will reflect risk, and you could pay more than would normally be the case.
The main point is that it is worth putting in a call to your insurer to see what you’re business is covered for. The news may not be what you’d hoped for. But at least you won’t be left wondering.
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