Business interruption insurance can often be overlooked by many businesses. The assumption being that other stand-alone insurance products will cover the losses incurred by events such as a flood or a fire. However, whilst buildings and contents insurance products for example will put the physical damage right, they do not necessarily take in to account the significant financial losses that your business may suffer as a result of the inability to trade after a disaster.

This is where business interruption insurance comes into play. Business interruption insurance is designed to provide cover for lost revenue and income if your business is unable to trade following an insured event. This can be especially important to small businesses who may not have the resources or finances to cover a period of downtime in trading. Figures suggest that as many as 70% of small businesses do not recover following a disaster such as a fire or flood and this is often thought to be because of not having the correct or enough insurance in place.

How much cover do I need?

This will of course vary significantly by business but there are some areas you may want to look at when considering how much business interruption insurance to take out.

How important are your premises to your business success – if you could easily operate from a temporary location such as serviced offices then your needs may be reduced. However, if you are reliant on your premises for your success e.g a shopfront with guaranteed footfall, then you may need to invest in more business interruption cover as your losses from having to move out whilst damage is fixed are likely to be higher.

Employees – could you afford to pay your employees if you are unable to trade or deal with the loss of valuable employees if they were to leave if you were to incur a very long period of not trading.

Customer loyalty – if you rely on a loyal customer base could you guarantee they wouldn’t go elsewhere if you had to stop trading or survive whilst you rebuild your customer base when you are back trading?

When considering your needs, the key is to avoid being in a position of being underinsured if the worst should happen and you do need to make a claim. Underinsurance is where you do not have enough insurance to cover your assets as well as the costs of getting back up and running.  Focused on providing cover for financial losses as a result of an insured event, Business Interruption cover can make all of the difference in your business surviving the effects of a disaster.