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;
Pre-Rebuild
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 ACII – Chartered Insurance Broker and Account Executive