If you run your own business then you probably have business insurance in place to protect you if your offices or equipment gets damaged, one of your employees gets hurt at work, or a customer is injured on your premises. But what would happen if you had to stop trading for a while? Do you have insurance to cover any lost income? This is where Business Interruption insurance can help.
While taking out insurance for tangible assets is the obvious and sensible thing to do, protecting lost income can easily be overlooked. It’s also relatively easy to estimate how much cover is needed for physical assets – simply find out the rebuild costs for office premises and calculate the value of contents and business equipment. But how do you work out how much business interruption insurance you need?
40% of businesses with business interruption insurance are under-insured, according to the Chartered Institute of Loss Adjusters. This illustrates just how difficult it is to calculate the amount of cover required.
What are the factors to consider when calculating how much Business Interruption insurance you need?
There are a number of factors to take into consideration when working out how much cover you need. The first is to work out how long your business might be out of action for. To do this think about the various disasters that could hit you – and these are many and varied. Recent well-publicised examples include mobile phone outages causing short term but nonetheless serious disruption to businesses, through to ramraids on ATM machines, resulting in the destruction of the walls they were set into. This latter example, where the ATMs are set in the walls of small business premises, can cause disruption for as long as two years or more while the building is re-built. Use the worst case scenario as your indemnity period and expect this to be a minimum of 24 months.
You should also take into account factors such as time it might take to recruit new staff, install equipment and move back from temporary premises.
Once you have an accurate fix on your indemnity period, you can forecast your expected loss of income and profits over this time, using figures from the last couple of years as a guide and adjusting for inflation.
In addition, find out if you are liable for the rent on your business premises, even while it is under reconstruction and include this in your calculation.
If you buy your insurance through a broker, then they will be able to guide you through the whole process and ensure you have an adequate level of cover.
Why isn’t Business Interruption insurance enough on its own in the event of a business disaster?
However, having sufficient business interruption insurance isn’t enough to ensure you are comprehensively protected. The speed with which you can get your business up and running again after a disaster is a key part of long term success. To support you in this, the services of a specialist disaster recovery firm, such as First Recovery, can be invaluable. In the event of a catastrophic incident, they quickly deploy Disaster Event Managers to advise and guide you through what can be a very traumatic and stressful event. They source alternative temporary premises nearby within 24 hours, giving you the means and capability to communicate with suppliers and customers and get essential services back up and running.
Why not give your business the best chance of recovering from a disaster and get in touch with the team at First Recovery today?