What would you do if some unforeseen circumstance prevented you from running your business? Perhaps a major theft, or considerable damage caused by a fire or flooding from a burst water pipe. What impact would that really have on your organisation, and, the ongoing relationship with your customers?
Although most businesses have insurance cover for asset replacement, they may not have any allowance in place for potential financial losses associated with the inevitable disruption. This in itself could actually be fatal for an organisation.
What does business interruption cover?
A business interruption insurance policy is designed to put your organisation back to the same trading position it had before the event occurred.
If an incident occurs, your business will face a number of risks which business interruption insurance can help you overcome. The policy affords you time to recover your customer base and potentially pay for any necessary increased costs of operation incurred whilst doing this.
Causes
There are many different causes for business interruption policies to be activated but the most common are fire and flood. Although your standard business insurance should cover your material losses, these events can be devastating.
Flooding
Flooding needn’t come from downpours or flood waters rising, it could be a burst pipe in your building. The loss of business you suffer from prolonged repair could go on for months with the need for specialist equipment to dry your building back to a usable state.
If you are unable to trade, you will lose revenue, potentially customers and put your business in serious danger financially.
Fire
The same applies to fire damage, with the potential loss of records, the inability to trade effectively and the pressure on your cash flow that comes with intermittent trading.
Indemnity Period
This is the length of time the business interruption cover runs for. Each business will have to assess how long it would take to get themselves back in to the same position they were in prior to the event, so you would have to consider the following in the event of a total loss: rebuilding times, ordering new plant and machinery and loss of market share.
Typical limits of indemnity can be 12, 18, 24 and 36 months depending on your trade sector and business circumstances.
Do you need business interruption insurance?
Like all policies, business interruption insurance is all about mitigating risk. If you are confident that an accident such as a fire or flooding would not impair your ability to continue to do business the very next day, then you may not need it.
However, when you take into account stock, data and the physical location of your premises, is this realistic? Some of the things that you may not see as that important to a customer may be from their point of view – and they are the very life blood of your business.
If you are unsure if you need business interruption insurance or would like to discuss your options, why not get in touch with us today?
