What is Business Interruption?
Business Interruption provides protection against a reduction in Gross Profit as a consequence of a material loss arising from an insured event. For example if as a result of a fire your stock is destroyed and your premises are temporarily uninhabitable, your business will suffer from a reduced turnover in the subsequent months or years. A Business Interruption policy will protect this reduction in turnover so as to allow you to function as normally as possible in the interim.
Why is it important?
If correctly arranged, Business Interruption cover could prevent your business from suffering further following a catastrophe as Axa report that 70% of businesses affected by a major incident either never re-open or close within 18 months.
A Firth & Scott client suffered a fire at their village shop. They received a total of £154,656.80 from their insurers as a result of the loss, of which a sum of £109,098.04 related to the business interruption section.
Issues to Consider
- Correct sums insured – we find that a large proportion of new clients have incorrect sums insured. This means that in the event of a claim they would be likely to only receive a proportion of the claim settlement, depending on the level of underinsurance, or there is even the potential that the claim could be refused
- Indemnity Periods – this represents the maximum period of time for which you can claim, starting from the date of loss and finishing when you gross profit returns to normal
- Extensions to cover -protection under a Business Interruption policy can be extended to provide additional protection which could be vital to some businesses. Questions to ask yourself should include: Is customer access vital to us? Do we have an irreplaceable customer or supplier who would impact our business if they suffered an insured loss?
Business Interruption is a complex matter as there will be specific aspects of your business which will require careful consideration when arranging your cover correctly. At Firth & Scott we have vast experience of arranging Business Interruption insurance for our clients and can provide you with expert advice in this key area.