Business Interruption Insurance
Business Interruption Insurance
When it comes to taking out insurance to protect your business again unexpected threats, there are a number of core covers that are likely to form the foundations of your insurance package – no matter which industry your business operates within.
Typically, business interruption insurance is one of these covers.
What is business interruption insurance?
Business interruption insurance (BII) is a policy that’s designed to offer your company protection against financial losses caused by a disruption to normal operation. If your business has to close – fully or partially – due to an unforeseen event, business interruption insurance could provide valuable financial aid during this closure. A successful claim could provide you with funding to cover:
- Outgoing bills - It’s likely that you would still be required to pay standing charges that your business has in place, such as utility bills.
- Income loss - If your business is closed, then you probably won’t be turning a profit. Even with partial closure, you could still find that the cash flow is still not enough to fully support your business.
- Payroll costs - You may still need to pay your staff during a time of unexpected closure.
- Loan or mortgage repayments - It’s highly likely that you will still have to make loan repayments when your business is temporarily closed. Some loan providers may even require you to have business interruption insurance in place before approving initial loan requests.
It is important to note that business interruption insurance is traditionally only valid subject to a successful damages claim. For instance, if your business suffered major theft that resulted in you having no stock to sell – therefore being unable to operate normally – you may not be able to claim on a business interruption policy without first making a successful claim for the stock on a contents insurance policy.
What does business interruption insurance cover?
Business interruption insurance can protect against disturbances that affect your business’s ability to operate normally. This could include disturbances at your own premises or at a nearby one - providing that the event has caused a genuine interruption to your business’s operations.
An interruption could be caused by events such as:
- Severe damage - Where rebuilding or extensive repairs are required
- Major theft - For example, of stock which cannot easily be replaced
- Denial of access - If you cannot physically enter your premises
- Failure of utilities - Your water, gas or electricity supply is unable to reach you
- Supplier failure - Where a supplier fails to deliver, leaving you unable to trade
- Customer failure - A major customer is unexpectedly unable to purchase from you
- Food poisoning or infectious disease - Requiring closure for health and safety reasons
- Death - Where a police investigation may be required, such as murder or suicide
- Animal infestation - The likes of vermin and insects.
It’s important to remember that there is no guarantee that all of the above events will be included in your cover: some may be included under standard cover, some may have to be added on as extensions, and some you may be unable to protect against altogether. The extent of your cover will depend on the size and nature of your business, as well as the level of risk you present to an insurer.
Business interruption insurance claims examples
To further illustrate the protection that business interruption insurance can provide, let’s consider some examples:
- Your office suffers from an internet outage lasting more than eight hours, leaving you and your employees unable to work for this period of time.
- You run a cafe situated next door to a football stadium, on which you rely for much of your custom. The stadium suffers severe weather damage, and repair work means the whole street has to close temporarily. During this time, your cafe suffers from the sharp decrease in footfall.
- You’re a pub landlord, and the street your business is on has to be closed due to flooding in the street. Because the closure lasts for a few weeks, your business suffers financially from a lack of custom while still having to pay overheads.
In all of the above situations, a successful claim on a business interruption policy could provide financial support for the business affected.
How much does business interruption insurance cost?
Because business interruption cover can be added to virtually any business’s insurance package, it’s difficult to provide indicative prices without an individual analysis of the business in question. There are a number of factors that could influence the price of a business interruption insurance policy, including:
- The extent of cover required
- The industry your business operates within
- Your business’s physical location and surroundings
- The amount of profit your business makes.
- Let’s consider an example. A small florist’s shop, located in newly built premises and only requiring minimal insurance cover, would likely present a relatively low business interruption risk to an insurer. On the other hand, a large scale manufacturer, located in a flood zone and requiring fully comprehensive protection, would present a much higher level of risk. In this example, it is relatively safe to say that the florist’s business interruption insurance would cost less than the manufacturer's.
Business interruption insurance quotes
To find out how much it will cost for your bespoke business insurance package, you’ll have to get a quote from an insurance provider. It can often be beneficial to compare business insurance quotes from a number of providers, in order to make sure you’re getting the right deal for your business.
Make It Cheaper Financial Services can do just that for – saving you both time and money. Call 0800 970 0077 today for your bespoke business interruption insurance quote.