The Importance of Business Interruption Insurance

Released On 23rd Nov 2021

The Importance of Business Interruption Insurance

Unexpected business interruptions can be financially devastating. Fortunately, there’s a way to prepare for them.

The two most common forms of business interruption are fire and flood. Statistics are showing a trend towards increased rainfall in the UK. According to the Met Office, the UK was an average of 6 per cent wetter over the last 30 years (1991-2020) compared to the 30 before that. Flooding remains a risk to businesses, but not only from rainfall. Events such as a burst water pipe can be just as problematic.

A flooded building can take between two and six months to dry out and become habitable. While building and content insurance policies will cover the initial damage, businesses must consider how they’ll cover financial losses while unable to trade. This is where business interruption (BI) insurance comes in.

During the recovery from an interruption, a business may be unable to operate, leading to a loss in revenue. This downtime, in turn, may result in the loss of irreplaceable staff and valuable customers. To minimise this risk, a business would benefit from trading at a temporary location while their main premises is repaired. Yet, traditional buildings insurance doesn’t tend to cover this move or the associated loss of income.

BI policies can be added to building and content policies to fill this void. Policies can include:

  • Compensation for lost income while the business is out of action and gross profits that would have been earned had the major event not occurred
  • Operating expenses incurred, such as utilities and rent, even though the business has temporarily ceased
  • Compensation for the increased cost of working, including the expenses of operating in a temporary location while repairs to the permanent premises are completed
  • Help towards the cost of the employee payroll

BI insurance can be a lifeline for businesses in the event of a disaster. Businesses can feel safe knowing that they’ve prepared for the worst by adding BI insurance to their existing policies.

Watch out short video and contact us today to find out more.