What is Business Interruption Insurance?
Most small business owners like to prepare for unexpected events by insuring their physical assets, such as their premises, contents, stock, machinery and equipment. But have you thought about what would happen if you had to shut your doors for a few days, weeks or even months due to an insurable event, like fire, storm or theft?
Would your business survive? How would you continue to pay for things like rent, utilities, staff wages and other business expenses?
Business interruption insurance is designed to provide compensation for the financial impact of these events and help place your business in the same financial position it was before the chaos.
It is an important form of cover for small business owners, as the slightest hiccup can send your business into turmoil and cause chaos to your finances.
Who should consider it?
Disruption to your business may be caused by:
- Weather events like storm, wind, flood, water, etc.
- Fire damage
- Loss of manufacturing plant & machinery
- A disruption at the premises of a major supplier
- Theft of contents or stock
- Prevention of access to your premises
- The disruption of power or other utility networks
Consider a small café that suffers a fire in the kitchen. The café
cannot open until repairs are carried out which may take weeks
as the debris is cleared and new equipment is ordered and installed.
Without Business Interruption insurance the café will lose many
thousands in revenue and still have certain fixed costs to pay,
i.e. rent and other overheads.
What can it cover:
The main sections of the policy are as follows:
- Loss of revenue or gross profits after an insurable event
- Loss of rent received
- Additional increase in costs of working
- Business relocation costs
- Training costs for operators of replacement machinery
- Claims preparation costs
- Accounts receivable
What isn’t covered:
There is often a 48 hour “excess period” applicable and a monetary deductible may also apply.
There must also generally be material damage covered by a property policy for Business Interruption cover to apply. For instance, a fire at your premises is covered by your property policy, therefore Business Interruption is triggered.
Other exclusions will apply and you should review any quote received carefully and consider the policy wording for all policy terms, conditions, exclusions and limitations.