Business Interruption Insurance can help your business keep going in the event of a major incident
If your business was affected by a major incident such as a fire or flood, it’s not only your employees and your property that could be affected. Business Interruption Insurance can protect your business by covering the shortfall between your expected profits and your actual profits.
Replacing your buildings and your contents can be straightforward compared with the complexity of getting your business back to its previous levels of profitability. Many businesses go out of business within three years of a major incident.
What is Business Interruption Insurance?
Whilst your main Business Insurance policy helps replace your buildings and its contents, and your Liability Insurance covers any liability for death, injury or financial loss, you still need to consider the impact on the profitability of your business after the incident. Many businesses underestimate the effect a claim will have on their profitability, and the time it will take them to get back to normal. That is why so many of them go out of business in the years following a claim. Business Interruption Insurance – sometimes also known as ‘Consequential Loss Insurance’ – can cover shortfalls in your pre-tax profits and/or any increases in working costs incurred as a result of the claim.
When thinking about a major claim, many businesses fail to consider factors such as:
- Cashflow problems – If you’re unable to fulfil orders, customers will not pay you, which can very quickly lead to cashflow problems
- Loss of reputation – Rightly or wrongly, being the victim of a major incident can give the impression that your safety procedures were not adequate
- Customer defections – If you’re unable to supply products to a customer, they will either go elsewhere, or find a way to get by without your product – neither is good news for your business
How do I arrange Business Interruption Insurance?
Business Interruption is typically sold as part of a ‘combined’ or ‘package’ insurance which will also cover damage to your buildings. The policy covers your decrease in expected pre-tax profits and can also cover any increases in working costs required to help you get back to normal.
This is a complex type of insurance, where no two customers or policies are the same. For many businesses, this policy could make the difference between them surviving or not, so it is important to get things right and get some professional advice. We have dealt with many Business Interruption Insurance claims over the years, and know the pitfalls that some businesses make when looking to arrange this type of insurance.