While the insurance market continues to get to grips with those new and emerging risks like cyber insurance, it’s easy to forget about the basics. Business Interruption(BI) cover has been around for a long time and often thought to be well understood, but can be a policy that’s easy to underestimate.
Simply put, BI will protect you against the loss of income or profit as a result of physical damage to your premises. The policy will pay you until your business is back in the same position it was in before you stopped trading up to the agreed limit, but also up to the agreed time period.
Generally speaking, we see most clients plump for a 12 month limit – after all, surely a year would be long enough to get a business back up and running? Most policies offer this cover for 12 months as standard, and as soon as you hit 12 months, the insurers stop paying, regardless of whether you hit your agreed limit of indemnity or not. Cover can be bought for longer, up to 36 months, and there are some good reasons to consider longer than 12 months.
Events over the past few years, such as Covid-19 lockdowns and the war in Ukraine, have shown us just how fragile supply chains are, and we continue to see knock-on effect throughout insurance. Lockdowns saw mass shortages of building materials affecting how long it takes to get a premises rebuilt, shipments continue to be delayed at ports as a result of new customs checks, lead times for new machinery and vehicles continue to get longer and longer, and we’ve even seen some factories have had to move from Ukraine leading to vast back-orders to be fulfilled (personal note – I’ve had a new fireplace on back order from Ukraine for nine months that has only just arrived!). And this is just for ‘off the shelf’ items – add in anything that needs to be customised or built as a one-off, and the design element adds on even more time to be drawn up and commissioned.
Another element that’s often overlooked is your customer base. BI also gives you cover to get your business back to trading as strong as before the event. However, your customer base needs to keep trading too, and it’s very likely they will need to find alternate suppliers while you get back on your feet and it could be difficult to win these back. BI can give you that extra buffer to get your client base and your income back to where it was.
Put this altogether and it’s very easy for a premises rebuild to go over 12 months as the supply chain struggles through a perfect storm; if you only have 12 months, there’s a chance the insurance might fall short and leave you exposed. Insurers can and will consider longer periods and the cost is often fairly inexpensive. It could provide you with much better peace of mind to help stick out that rough period if the worst comes.
Out team are are on hand if you’d like to discuss this level of cover for your business.
By Sam Harby – Senior Commercial Account Handler.