A simples guide

Business Interruption Insurance

Understanding the risks that face your business is one of the most important aspects of running or managing a company. The process, known as risk management, starts with identifying the events that the business might face. Once these are identified, plans can then be put in place to minimise the impact of these events.

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Overview

There are a number of events which could impact a business’s ability to trade. A significant fire could damage key office space or damage important stock. A flood also has the potential to cause similar interruption. It’s important to think beyond these more obvious types of loss though. Do you have a specific machine that’s fundamental to your ability to do business? Are you reliant on a key supplier, the failure of which would damage your business?

Losses to your business such as on buildings, fixtures and fittings and stock will be covered under a buildings and contents type of policy. However, in the event of a significant event hitting your business, these types of loss may actually be of secondary importance when it comes to the true cost to your business.

If you can’t trade, this might hit your sales and profits for some time after the event. There may also be additional costs to cover in terms of third party fees as well as the costs of implementing any continuity plans.

You can insure against these losses by taking out business interruption cover.

Taking out a business interruption insurance policy will cover you for the loss to sales and profits during the period that you are unable to operate. It aims to put your business back in the same trading position as it would have been had the unfortunate events not happened in the first place.

Business interruption insurance is very specific to your business and will only be put in place after detailed discussions with the insurance provider who may act as a middleman.

As well as discussing the specific requirements of your business, you’ll need to ensure you have kept good records of your businesses trading position and have the evidence to hand to support it. This will allow your insurance provider to accurately calculate the premium and potential payouts.

Your insurance provider will talk you through exactly what events are covered and which ones aren’t. There are certain events that are typically excluded from general business interruption insurance, such as cyber or terrorism risks. Both of these can be covered with additional specific cover if required. 

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