Often misunderstood, business interruption cover is one of the most overlooked, but potentially crucial insurance policies on the market.
Business interruption insurance is put in place to protect your business against loss of income, resulting from an inability to trade due to an unanticipated interruption. This could include significant damage to property, such as fire damage, theft of essential equipment, or following a flood that has left your premises rendered unfit for use.
These rare, but not impossible circumstances could also affect your business in a number of other detrimental ways. Staff absences, depleted morale, equipment and stock damage, and the loss of important physical documents can also occur.
But business interruption insurance would protect you against many of these eventualities – including the impact of significant damage to a nearby property.
If you cannot access your premises, for instance in the event of a gas explosion nearby, your insurance will kick in. Similarly, a flood in a nearby home or building, which has impacted your business – or even the business of a supplier you rely on – could be covered.
What is different about business interruption insurance?
Business interruption insurance intercepts claims made against your building or contents insurance, covering any financial losses that are a direct consequence of a business interruption. This may include loss of rental income and loss of revenue as well as any additional staff costs incurred.
Do I need business interruption insurance?
This is dependant upon a number of factors. If the events are unlikely to affect you, then it’s by no means a necessity. For example, if a burst pipe flooded your premises and had little impact on your ability to trade, for instant if you work in already serviced offices, it’s not necessary.
On the other hand, you may house a lot of stock, or require large premises in order for your business operations to run smoothly. In this case, business interruption insurance may be the only way to ensure you stay in business long enough to survive a particular event.
That said, there are many other factors to consider, including customer loyalty. It may be that you’re able to survive being closed for a month. However, this is business we’re talking about – and even the most loyal customers will flock to new suppliers if they feel you are unable to help them.
Although you may anticipate having operations back up and running within one month – the subsequent cost of lost sales and customers may mean the damage is already done.
The pricing behind business interruption insurance is dependant on the risks particular businesses face. A restaurant will be more expensive to insure than a retailer owed to the increased use of heated appliances and grease making for a higher risk of fire. A hair salon may also be more expensive to insure owed to the heated appliances and chemicals used, though it’s important to have appropriate Beauty Salon Insurance to protect your business.
Additionally, businesses in certain locations are more likely to sustain certain types of damage, for example those built on flood plains will attract higher premiums.
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