Business Interruption Insurance – are you fully covered?
Insurance is a complex world. There’s an abundance of jargon and terminology which can be difficult to fathom. Business Interruption Insurance is no exception. Many business owners have business interruption as part of a Commercial insurance package and assume it will cover them in the event of the worst happening. It is believed that f businesses do not have enough business interruption cover to get them back on their feet. 25% of SME claims reviewed by the FCA determined the indemnity period was not long enough to return the business to a normal trading position. Not having the right cover in place could be catastrophic. Read on and find out how to avoid being a statistic.
There are several common misconceptions when it comes to business interruption insurance for you to consider.
Business Interruption insurance requirements are calculated using a different definition of gross profit to your accountant’s figures. This can immediately lead to problems. Accountants will generally strip out things like staff and utility costs, whereas insurers will not. There is, therefore, a risk of underinsurance, resulting in only a partial payment, or non-payment, in the event of a claim.
Additionally, businesses typically underestimate the time it will take to get the Business back up and running in the event that something goes wrong – for example a fire or flood. Many standard business interruption indemnity periods are 12 months, which in many cases simply isn’t enough time.
The indemnity period needs to represent the estimated time it will take to repair or replace the building and equipment and to return the business to the same trading position as existed before the loss. You may have specialist or complex equipment, which may be obsolete or difficult to source causing delays which will affect the time it takes to re-establish your business.
In summary, logistics, transportation, planning permission, building regulations and design, and installation of new plant can increase timescales, often rendering the indemnity period inadequate.
BJP Insurance Brokers work closely with all our clients to make sure your risks are properly assessed and that you are aware of the correct way to calculate your sums insured and indemnity periods.
Once a loss has occurred, it is too late to avoid the negative impact of underinsurance and therefore it’s important to get the right sums at inception and renewal of your policy.
For any help, advice or guidance on Business Interruption Insurance, please contact us on 0118 979 2121.