Avoiding Underinsurance: Assessing Business Interruption Needs

Business interruption insurance, is cover that helps you financially should something unexpectedly stop your business from trading, such as insured damage to your property. This could be for a number of reasons, but largely arise from fire, flood, or major theft, all of which could leave your premises unusable for your business.

When this happens, Business Interruption insurance will kick in, supporting you with funds to help you get your business back on its feet, and continue trading whilst you build your business back up to it’s fully operational capacity.

How to avoid under-insuring for Business Interruption

When considering how to protect yourself, the first thing to consider is your gross profit or revenue. Your Business Interruption Insurance should accurately reflect these numbers, otherwise, you’ll inevitably be left with a shortfall should the worst happen. You should also pay close attention to how long you think it will take to get your business back on its feet after a loss. This period, called the indemnity period, will be how long your business interruption insurance will pay out for in the event of a claim.

Be very careful to check your indemnity period on any business interruption policy. Because periods offered by ‘standard’ policies or online quotes are frequently insufficient for most businesses.

Two years is likely to be a minimum period  for a business to fully recover its trading level. It’s sensible to be cautious about the speed of your recovery, and take into account how much control you have over the recovery. You may be dependent on third parties who could slow you down more than you think.

40% of businesses don’t have enough business interruption cover to get them back on their feet.

That’s according to the Building Cost Information Service. And that’s a frighteningly high number. Business Interruption is one of the key ways a business could fail in the event of a major incident. So don’t let you, your business, and your staff become a statistic. Take the time to interrogate your insurance policy, and make sure that you’re safe should the worst happen.