All businesses should protect themselves with business insurance. But did you know that there are lots of different types of insurance, all covering different risks faced by businesses? Business insurance is the umbrella term; there are a myriad of different types of insurance that fall under that.
Some types of insurance are more obvious and well-known. Office premises and business equipment will be covered by Buildings and Contents insurance; employees are covered by Employer’s Liability insurance, which you are legally required to have if you employ people; and customers and members of the public are protected while they are on your premises by Public Liability insurance. If your business provides professional services it’s likely that you’ll have Professional Indemnity insurance in place to cover you for any potential mistakes you might make.
However, perhaps less well-known is Business Interruption insurance. Business Interruption insurance is designed to provide financial compensation if a business suffers a disaster and has to cease trading for a period of time as a result. Business Interruption insurance covers that loss of income while the business is closed.
As a business owner it’s easy to overlook the need for Business Interruption insurance. When considering what insurance you need, you could well be focusing on the physical assets that you own and thinking about the potential for people to be injured during a disaster. You will not necessarily think about events after a disaster and the impact it could have on your business’s ability to trade.
Yet the fact is that for those businesses hit by disaster, the business interruption element of the claim is the largest part. It can often be far bigger than the costs associated with repairing buildings and replacing damaged equipment. For businesses forced to close for lengthy periods, the Business Interruption cost is even higher. This is why Business Interruption insurance is so important. In fact, research suggests that 80% of businesses suffering a disaster never re-open. For those without any business interruption protection at all their fate is sealed.
When calculating the amount of Business Interruption insurance you need, try to think about all the different types of disaster events that could close your business and consider the worst case scenarios. In our experience, it’s not unreasonable to anticipate that a business could be closed for a period of two years. It then takes time to build the business back up to pre-disaster levels. Review your earnings for the last couple of years and, if they tend to fluctuate, take an average to calculate the amount of cover you would need.
Business Interruption insurance does come at a cost of course. And the longer the time period you want it to cover, the more expensive it will be. But if it means the difference between your business surviving a disaster or failing, surely that is money well spent?