Business Interruption Insurance – What does it cover and do I need it?

Given the impact of COVID-19 on businesses around the globe and the recent FCA test case ruling by the Supreme Court, Business Interruption Insurance (BI) has rarely been higher in the public consciousness than it is now.

It is therefore worth considering for a moment, what a BI policy covers and whether your business should be buying it.

In its most basic form, the intention of the BI policy is to replace the lost profit or turnover following an insured loss at the business premises.  If a business suffers from a fire or flood or other insured event at their premises, which causes a loss of turnover and/or an increase in costs, the policy will aim to replace that lost income.

In addition to this core cover, the policy also has a wide range of add-on extensions, which can include things like denial of access, interruption to your services such as gas or electricity and even infectious diseases, which has obviously been at the centre of the current FCA test case.

These extensions to cover are automatically thrown in and the cover they provide can vary significantly from one insurer to another based on slight differences in policy wordings – which has obviously caused much confusion to policyholders during the current pandemic.

So, having said all of the above, does your business need BI cover?

The short answer to this is if your business is dependent upon your premises and would suffer a loss of turnover without it, the answer is yes.  Imagine a manufacturing business with specialist machinery, or a hotel for instance.  A significant fire or flood at a business like that would most probably shut them down completely for a period while they rebuild – without BI cover those businesses would most likely go bust.

If, however, your business can carry on through home working or if you work at your clients’ premises – such as in contracting or construction – then the answer is you can probably live without it.  Alternatively, you may be able to take out some cover which is pared right down and will primarily cover your increased costs of working to continue your business elsewhere following a major loss.

As with all business insurance issues, the key thing is to discuss your business and its requirements in depth with your broker to ensure that the cover you are buying is fit for purpose and that you fully understand what you are buying and why.

If you’d like any further information regarding Business Interruption or any other insurance matters please don’t hesitate to get in touch.

Sam Leeder ACII Actus Insurance samleeder@actusinsurance.co.uk 0114 2903624 07718 189476

 

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