How Does Business Interruption Insurance Work?
Be Covered with Business Interruption Insurance
Businesses often cover themselves for the unexpected by protecting their premises and its contents. However, there can also be financial losses as a result of business interruption.
What Does Business Interruption Insurance Mean?
A business interruption is one which harms business income. It’s an interruption that would affect the ability to trade or the costs incurred from having to operate from alternative premises. Business Interruption insurance protects you from going out of business should damage occur from an unexpected and insured event.
- Fire damage
- Water damage from floods or leaks
- Electrical failures
- Accidental damage
Financial losses could be the loss of income, reduced profits and any extra staffing costs you may incur.
How Business Interruption Insurance Works
Many businesses want help understanding business interruption insurance. The easiest way to understand it is to imagine that from the moment the damage to your building or contents occurs, you won’t be able to operate to full capacity and therefore your revenue will be hit. Once the damage has been assessed, you should have a schedule of when the damage will be repaired. Business interruption insurance policies will cover you throughout this period.
Why Buy Business Interruption Insurance?
Many businesses think that as long as they have business contents insurance and building insurance, they are covered for any losses. Businesses need to consider the consequences these losses would actually have on their business being able to trade at full capacity. For example, you may eventually be able to replace your equipment and furniture damaged by a water leak but could your business survive being shut for a couple of weeks or even months as a result of the damage? Could you afford to run your business from alternative premises while the damage is repaired? The consequences of unexpected events can reach far wider than just replacing what’s been lost. You may also lose valuable employees or customers who are forced to take their services or custom elsewhere.
How Long Does Business Interruption Insurance Last – Is There a Time Limit?
While Business interruption coverage won’t last forever, it will cover you from the date the loss of income began to the time the damage is repaired, or the business begins trading at a new permanent location or your indemnity period expires (usually 12 or 24 months) whichever the former. If your business wants to have extended time for business interruption cover, such as building up a customer base again, for example, this needs to be added to the policy.
How to Determine Business Interruption Insurance
When business interruption insurance is calculated, it includes several factors.
- Annual gross profit
- Determined business growth
- How long the business is expected to be out of trade for – schedule of repairs
While business interruption insurance can be confusing, it’s not something that should be overlooked. Businesses are insuring their premises and property but failing to consider the full consequences. To get more advice and determine which policies are the right ones for your business, speak to an expert broker. Invicta business can help you determine the best policies for your business. Call us today on 0330 0450032 to speak to one of our team about what we can do for you.