Whenever a business suffers material damage loss to property, there will be a resulting financial loss and disruption to business. If the business closes down completely while the premises are being repaired it may lose out to competitors. A quick resumption of business after a disaster is therefore very essential.
Business interruption insurance can be as vital to your survival as a business as property insurance.
WHAT DOES BUSINESS INTERRUPTION COVER?
Business Interruption insurance covers the financial loss resulting from the inability to trade following a material damage loss. The policy will typically cover the following:
While there are many different causes of business interruption, the two most common are fire and flood. No one ever expects these two disasters to strike their business, and when they do, they often mistakenly expect other policies to cover all of their losses.
A typical scenario for a flood claim won’t even involve heavy rain and a river that bursts its banks. Chances are that a pipe will burst or a rooftop water tank will collapse, and by the time you arrive in the morning your premises will be under three feet of water.
Well, stock can be replaced, eventually, as can computers. Yet a flooded building will often need at least two months to dry out, and in the case of a severe flood may take more than six months to be habitable again. Specialist machinery can sometimes take just as long to replace. If you cannot operate in the interim, you will lose revenue, possibly run out of money, and probably lose irreplaceable staff as well as valuable customers.
Cover is most often provided based on an Estimated Annual Gross Profit Sum Insured. Once the indemnity period has been chosen, the gross profit sum insured will need to be adjusted for that length of time. In doing this, account must be taken of future business trends.
Cover can also be provided based on gross revenue basis, which gives cover for the whole of the company revenue without deduction. This basis tends to be used in the professional services and sectors where variable costs are limited.
The period during which the business’ results are affected due to a loss or damage, beginning with the date of the loss or damage and ending not later than the maximum Indemnity Period.
When considering an appropriate indemnity period, it is important to consider the following;
The reasonable additional expenditure incurred to avoid or diminish any further reduction in turnover following a loss even if the amount payable exceeds the saving made. Inevitably there may be extra expenses that will not necessarily pass the ‘economic test’ for additional expenses, but may be reasonable in terms of medium-long term interest of the business. These can include the following;
A number of cover extensions are also available for consideration, some of these are often provided as an automatic add on to standard BI policy (please note the following list is not exhaustive).
HOW DO I START?
Assurein will assess your needs and assist you tailor a comprehensive package to address all exposures. Give us a call or email us and one of our staff will be at hand to help you get the best solution at the right price.