As a country with a large amount of metropolitan areas located on the coast or by major rivers, Australia spends much of the year on the cusp of flooding.
In fact, more than nine in 10 Australians live and work within 100 kilometres of the ocean, meaning they constantly have to keep an eye on the flooding risk level. Whether it’s brought about by heavy rainfall, natural disasters or tropical storms, it can be difficult to truly understand exactly how destructive flooding can actually be.
The Insurance Council of Australia (ICA) explained how widespread and costly flooding is all over Australia.
“Inland flood[ing] is a significant issue in Australia, historically accounting for nearly one-third of insured losses. From an insurance perspective, the worst affected states are NSW and VIC, followed by QLD, SA and WA, typically occurring from April to October.”
This makes now an opportune time to look at your level of business insurance. With winter coming, so is the rain – and with that comes a greater risk of business down time.
After the flood
For a business, a flooded premises is unusable. On top of this, equipment is often damaged and large renovations need to be made afterwards.
It’s often even worse for small businesses; when a company is so reliant on staying operational and bringing in revenue, every minute of down time is critical. Wages still need to be paid and creditors will ask for their money, so any moment when you are not putting anything into the pot is dangerous.
Fortunately, many businesses can be covered for any time spent on the side lines by their business interruption insurance.
What is business interruption cover?
Business interruption insurance not only covers an inability to sell goods or supply a service, but also the failure of utility companies on which the business depends, closure by a pubic authority, prevention of access to the premises or downtime to a critical supplier.
According to the ICA, Cyclone Marcia alone caused thousands of insurance claims earlier in the year totalling more than $400 million in damages.
Not all of that will be in property damage and other similar claims made to replace affected goods, but those to cover any lost income as a result of businesses being unable to operate.
Although natural disasters are at the high end of the scale, flooding does not only have to come from such large events.
What constitutes flooding?
The rules surrounding an insurer’s liability to pay is determined by the events meeting a certain criteria.
The insurance industry defines a flood as the “inundation of normally dry land by water escaping or released from the normal confines of any natural watercourse or lake (whether or not altered or modified), reservoir, canal or dam”.
If rainwater is on its way to a river or similar body of water, this is often enough to prevent it from being defined as a flood – although the damage may be no less severe if it happens in great quantities.
While most insurers will accept rainwater damage as part of flood insurance, it is important to understand the differences and make sure the wording of a business insurance policy covers a range of likely threats.
When it comes to protecting your business from floods, the experts have some key advice.
“Australia has a highly competitive general insurance market and cover is available for the majority of conceivable risks to property,” the ICA continued to explain.
“Consumers should undertake annual risk planning, taking into account the replacement value of assets and the nature of the risks in their location and then make sure that appropriate insurance is held to cover the risks and the costs.”
To help mitigate the risk of flood, rain or storm damage as we approach the winter months, contact your local MGA office for impartial, educated advice from a specialist broker.