Running a business comes with its fair share of surprises. From natural disasters to cyber-attacks and supply chain hiccups, unexpected events can cause major disruptions and significantly impact a business’ ability to function. That’s why understanding Business Interruption (BI) Insurance and Additional Increased Cost of Working (AICOW) coverage is so important – these two tools help businesses stay afloat when things don’t go as planned.
Understanding Business Interruption
Whilst standard property insurance covers the impact to or loss of physical assets, it doesn’t provide coverage for the financial losses from not being able to access your physical location or use your equipment.
Business Interruption Insurance can play a critical role in your risk management strategy as it acts as a safety net for businesses facing unexpected disruptions. If a fire, flood, theft, or other disaster forces operations to slow down or stop entirely, this insurance primarily helps to cover lost income during a temporary closure or rebuilding process.
Business Interruption can also cover ongoing operating expenses, such as electricity and rent, even though business activities have temporarily stopped. Essentially, Business Interruption Insurance keeps the business financially stable while things get back to normal.
A Closer Look at AICOW
AICOW, or Additional Increase in Cost of Working, is an optional add-on to Business Interruption Insurance. It covers the extra expenses a business might face to speed up recovery after an insured event, and helps to minimise the loss of gross profit so the business can continue to operate in some capacity. Think of it as the boost the business needs to get back on its feet faster. This could include renting a temporary office, leasing emergency equipment, or hiring extra staff to clear a backlog of work. Having AICOW means businesses don’t have to wait for full repairs before getting back to business.
The Power of Business Interruption and AICOW
Pairing Business Interruption insurance with AICOW coverage creates a strong financial buffer against unexpected disruptions. While BI covers lost income, AICOW allows businesses to take proactive steps to minimise downtime. Together, they provide a well-rounded safety net that helps companies weather storms and bounce back quickly.
Preparing for the Unexpected
The reality is that disruptions aren’t a matter of if—they’re a matter of when. That’s why it’s crucial for businesses to regularly review their insurance policies, assess risks, and have contingency plans in place. Understanding policy details and maintaining open communication with your insurance adviser can make a big difference when an unexpected challenge arises.
With the right coverage and preparation, businesses can turn disruptions into opportunities for growth. By leveraging BI and AICOW effectively, businesses can not only survive unexpected setbacks, but they can also come out stronger on the other side. Having these financial safeguards in place ensures continuity, protects business interests, and lays the foundation for long-term success.
To find out more about how BI and AICOW can help protect your business, get in touch with your Adviser.
General Advice Warning: This communication including any weblinks or attachments is for information purposes only. It is not a recommendation or opinion, your personal or individual objectives, financial situation or needs have not been taken into account. This communication is not intended to be a constitute personal advice. We strongly recommend that you consider the suitability of this information, in respect of your own personal objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product
