BUSINESS INTERRUPTION are you adequately covered?
In the light of recent floods, the effect to local business has been devastating with claims in Kirkstall Road alone amounting to £ millions
BPR Heaton spoke to independent insurance brokers to ascertain how working together can help protect clients in the future.
If a fire or flood causes your business facility to be temporarily unusable, what would you do next? Would your business be able to pay utilities, wages or any other standing charges without any income? It could take months before the damaged property is rebuilt and stock, machinery and equipment are repaired or replaced. Ideally, you would move to a temporary location while your permanent place of business is being repaired. Yet, traditional Property Insurance does not cover this move or a loss of income when a business must temporarily close. With Business Interruption Insurance, this setback can be minimised by simply adding this cover to your commercial Insurance policy.
We have also heard of some uninsured businesses being unable to continue trading and others experiencing difficulties due to inadequate or inappropriate cover.
What can be included in a Business Interruption Policy?
- Compensation for lost income if a business has to vacate its premises as a result of an insured peril.
- Compensation for the gross profits that would have been earned based on previous financial records, had the major loss/peril not occurred. It is highly beneficial to work closely with your professional advisors to provide accurate information.
- Covers operating expenses, such as utilities, that must be paid even though business temporarily ceased.
- Covers the increased cost of working, including expenses of operating in a temporary location while repairs to the permanent location are completed.
Considerations for Business Interruption Insurance
- Business interruption insurance cannot be purchased on its own -it must be added to an existing insurance policy, such as property or office insurance.
- Purchasers must also determine that the policy’s maximum indemnity period is sufficient to cover the amount of time it will take for the business to recover following a major loss. This includes considering the worst damage or disaster that the business could incur, estimating how long it will take to repair or replace buildings, machinery and stock, and determining the length of time it will take to recover customers and market share. Typical maximum indemnity periods range from 12 months to 36 months, in 6 month increments.
- Price of cover depends on the risk of disaster to the premises. This may depend on the business location, nature of the business and how easily the business could function at an alternate location on a temporary basis.
Insurance experts estimate that Business Interruption Insurance is one of the most, if not the most, valuable cover available, yet it is often overlooked by business owners. Since Property Insurance only covers the cost of physical loss or damage and contents of a business in the event of a disaster, Business Interruption cover is invaluable in covering the loss of income while the permanent business location is being repaired.
Produced in conjunction with, and by kind permission of, Dean Fletcher – Schofield insurance brokers Leeds 0113 202 1225 www.schofieldinsurance.co.uk