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Business Interruption: Is Your Business Covered?

Business Interruption: Is Your Business Covered?
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Business Interruption: Is Your Business Covered?

Many companies don’t survive a disaster, which is why Business interruption insurance is, arguably, the most important insurance cover for any organisation. CapitalSpace’s expert insurance partners, Absolute Insurance Brokers, explain why you need it and how it can help your business survive the worst.

The problem

If a fire caused your business facility to be unusable, even temporarily, what would you do next? It could take months before the damaged property is rebuilt and stock, machinery and equipment are repaired or replaced. Would your business be able to pay utilities, wages or any other standing charges without any income?

Traditional property insurance doesn’t cover the costs associated with temporary moves or loss of income when a business has to close on an interim basis. Without cover, many businesses may be forced to close down permanently.  In fact, the government estimates that around half of all businesses  experiencing a disaster that don’t have effective plans for recovery – including business interruption insurance – fail within the following 12 months. 

The solution

Business interruption insurance cannot be purchased on its own, it must be added to an existing policy such as property or office insurance.

A business interruption policy can provide:

  • Compensation for lost income if the business has to vacate its premises as a result of disaster related to damage covered under a Property Insurance policy
  • Compensation for the gross profits that would have been earned had the major loss/peril not occurred, based on previous financial records
  • Cover for operating expenses that must be paid even though business is temporarily suspended
  • Cover for the increased cost of working, including expenses of operating in a temporary location while repairs to the permanent location are completed.

Things to consider

Businesses must determine what maximum indemnity period is sufficient to cover the amount of time it will take for them to recover following a major loss. This includes considering the worst damage or disaster that could occur and estimating how long it will take to repair the damage. It is also important to consider how long it will take to recover customers and market share. Typical maximum indemnity periods range from 12 months to 36 months.  

Your insurance broker can help you identify these major risks and indemnity periods, as well as making sure that your insurance cover is adequate for your needs.

More expert advice from CapitalSpace and Absolute Insurance Brokers:

Five steps to getting your risk assessments right

Protecting your business and your personal assets

Cyber risks: don’t under-estimate the impact 

About Absolute Insurance Brokers 

Established in 2009, award-winning Absolute Insurance Brokers work across a wide spectrum of industries and professional services, from start-ups to large nationals.  Their specialist advice includes areas such as risk prevention and health and safety measures.  Absolute’s philosophy as independent brokers is to provide complete peace of mind for their customers by understanding their businesses to develop the right type of insurance program to ensure their requirements are met.  This approach, underpinned by first-class personal service, has underpinned Absolute’s growth, from a starting point of just 3 members of staff to more than 20 employees.

Steve Salter – Head of Trading

Steve recently joined Absolute Insurance Brokers with 29 years’ experience working for a global insurer, where he led a team of cross class underwriters handling all classes of general insurance.  This has provided Steve with an unparalleled understanding of the risks businesses face and an insight into insurers’ approach to risk.

Warren Merton – Director

Prior to co-founding Absolute, Warren worked in the insurance industry as both a broker and underwriter for over 20 years.  During this time, he undertook roles in both the London market and regional operations.  This included working for a number of leading insurers and national brokers in both commercial underwriter roles and new corporate business development.

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