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LOSS OF CASH FLOW
A business can exist without making profits but never without a cash flow. When your business’s cash flow is interrupted or ceases as a result of an event for which material damage insurance is in force you could be facing disaster. Loss of Cash Flow insurance covers your turnover and will provide assistance to enable your business to continue operating with minimal disruption to your financial situation.

Federal Government statistics show that of all the businesses involved in a major material damage loss - not necessarily a total loss:

• 43% never re-open
• 28% fail in the next 3 years
• Only 29% survive
• 71% disappear

Cash Flow:

Cash flow is vital to the survival of any business.

Cash flow is used to pay:

• employees,
• suppliers,
• bills and
• most importantly the business owner.

An interruption to a business' cash flow will increase the costs to the business as a result of increased borrowing and potentially place the ongoing existence of business into uncertainty (difficult times).

With a policy from Interruption Underwriting Agencies (IUA) a business can elect to insure its cash flow.

In this case, cash flow is a list of the cash expenses incurred less those cash expenses that will cease such as payments for purchases as a proportion of its cash income, alternatively the insured can simply nominate a sum to insure based on their requirements.

Benefits:

The benefits of the IUA policy include:

• no average,
• no deductions for savings in business overheads
• claims paid every 7 days where practical
• no sub-limits
• no time deductibles
• public utilities includes sewerage and telecommunications

This means that Turnover figures for the period before the loss and after the loss are provided quickly. The Policy also has an agreed Rating Classification and Flexible Indemnity Periods - 13 weeks up to 104 weeks.

How is the Sum Insured calculated?
IUA calculates the sum insured the same way they calculate the claims payment, based on turnover.

Calculating a sum insured is basically a 2 step process:
1. Divide Annual Sales by 52 to provide a weekly turnover. IUA then apply a rating Classification from a list of IUA Standard Rating Classifications or calculated from the Insured's budgets or Trading Statements. This then provides the Weekly Sum Insured which is multiplied by the selected Indemnity Period for the maximum benefit payable under weekly benefit.
2. The second step is to include some After Loss Costs or Lumped Extensions. These are to assist the business in returning to normal.

An example is shown below:
In this example we have chosen a 20 week indemnity period as being required. The most appropriate indemnity period will vary from business to business.

Business /Turnover Light Engineering - Manufacturing Annual Sales = $400,000

Rating Classification
Based on IUA's Standard Rating Classification 55%

To arrive at Weekly Sum

$400,000 divided by 52 (weeks) multiplied by 55%
$4,500 x 20 weeks (figures have been rounded up) = $90,000
Lumped extensions $50,000
Maximum Liability $140,000

Click here to enquire about Loss of Cash Flow insurance.