BUSINESS INTERRUPTION INSURANCE

How business interruption insurance can protect and even save your business

If disaster strikes – a fire is typically the most serious incident – you need protection that ensures that the business continues to operate financially even when in some situations it is not possible to operate for a certain period of time!

In these situations Business Interruption covers the overheads of the business – including wages! Cover can also be arranged to provide funds to pay for additional costs – you may need to temporarily re-locate or take on temporary staff or incur additional costs just to continue to supply your valued customers. It also covers lost profit which ensures that the business is still going strong when the work is complete to repair damage after the fire or flood or other loss.

Business Interruption Insurance is dependent upon your property insurance and can help with your business continuity planning. The cover provides financial support to help your trade continue during the period where you might be suffering from a reduced or lost turnover as a result of a claim due to damage at your property, affecting your ability to produce your goods, or undertake your services.

Time Is Of The Essence

Many indemnity periods (the length of time during which the policy will make good any reduction in Turnover and consequent reduced Gross Profit) are only 12 months in length, and should be increased to a minimum of 18 months to provide the degree of protection needed to ensure your firm recovers its pre-loss trading capacity. The sum insured chosen needs to reflect the indemnity period, i.e. 1.5 x , or 2 x the conventional annual Gross Profit sum insured, and very serious consideration must be given to how the sum insured is arrived at. A formal definition of Gross Profit or Gross Revenue/Income is essential to calculate your sum insured properly. Ask us to go through this with you.

Additional Increased Cost Of Working (AICOW)

Often, there is a pressing need to spend money, in order to save a future loss of income. However, insurers apply an economic test and will not pay more than a pound for every pound of lost income saved. And they need to authorise such expenditure in advance. A separate sum insured for AICOW will give you the freedom to direct claims money appropriately.

Take The Time To Get It Right…Your Business May Be On The Line

Business Interruption claims can be extremely fraught; as insurers will often appoint forensic accountants to examine financial records and claims can be drawn out. Getting the sum insured and indemnity period right, coupled with a sensible AICOW item, will make your experience of a Business Interruption loss much less harrowing.

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