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Business Interruption Insurance: is it really necessary?

This insurance protection can be the most important you buy.  The purpose of Business Interruption cover is to return the business to full trading profit but if not arranged properly it can have some very significant consequences.

In our experience, it is not the assets insurance or lack of cover that ruins a business after a major loss; it is the lack or inadequacy of their business interruption cover!


The cover pays for loss of earnings for a pre-agreed specified period known as the Indemnity period following an interruption to your business caused by an insured loss e.g fire, flood etc.

When calculating your indemnity period the following three stages should be considered;



Investigations – if the police, fire services or HSE are involved it could be months before you are allowed access to the site

Planning – the planning process can take a considerable amount of time

Location – if the area has changed in use you may be unable to obtain planning to rebuild on the same basis

Neighbours – if a neighbour’s property is also damaged this can cause delays in reinstating your own

Landlord – your landlord may not have adequate cover to rebuild or may have different plans for the site going forward

Site Access/Clearance – pollution, asbestos, chemicals can all cause delays


Rebuild Premises

Location – difficulty with access can increase rebuild times

Listed Building/Conservation Area – this could make the build more complex due to delays in sourcing materials, specialist contractors/craftsmen

Fitting out approvals – internals may need approval by trade bodies etc.

Locating Products/Materials – delays in sourcing materials – for example following the recession there was a brick shortage in 2016 which caused serious backlogs for the building trades


Rebuild Business 

Machinery – machinery may have long lead times for replacement and installation

Suppliers – often stock is purchased with long lead in times

Customers – customers may be lost and not return once the business has reopened.

Contracts – long term contracts may be broken and not available for tender for several years.


Doubling your Indemnity Period does not double your premium and may save your business, so please have a think about how this could affect you and feel free to contact your Account Manager or a member of the team to review your existing cover.

By Jo Elliott ACIIChartered Insurance Broker and Account Executive





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