A fire, storm or any other insured event can affect more than property and equipment. If operations are interrupted, income may be affected while many ongoing expenses continue. That's why it's important to review business interruption cover regularly and ensure it continues to reflect the needs of the business today.
What is covered by business interruption insurance?
Business interruption insurance is designed to help protect a business against the financial impact of an insured event that disrupts normal operations.
OUTsurance Business Interruption insurance provides cover for lost gross profit, lost gross rentals, lost revenue and increases in the cost of working, subject to the policy terms, conditions and limits.
Their standard cover includes the loss of gross profit, -gross rental or -revenue following damage to your business caused by insured perils such as fire, explosion, storm, wind, hail and impact.
Optional cover is available for certain additional risks, including theft, machinery breakdown and accidental damage.
How do growth and inflation affect business interruption cover?
The business insured today may look very different from the business insured a few years ago.
Higher revenue, increased payroll costs and other expenses, can all influence the amount of cover a business may need.
If business interruption cover is not reviewed regularly, it may no longer reflect the financial realities of the business. Regular reviews can help ensure that changes in turnover, expenses and business activities are taken into account.
How to calculate business interruption sum insured
Determining the amount of business interruption cover you need starts with understanding the financial position of the business.
Factors to consider include:
- Annual revenue or gross rentals
- Net profit
- Ongoing operating expenses, such as payroll commitments and rental and loan obligations.
- Each business has unique operational requirements, which means the appropriate level of cover may differ from one business to the next.
How do you choose the right indemnity period?
Another important consideration is the indemnity period.
The indemnity period is the maximum length of time during which business interruption cover can respond following an insured event. It should reflect how long the business could realistically take to recover and return to normal operations.
Recovery may involve more than repairing a damaged building. Equipment may need to be replaced, stock replenished, and operations restored to pre-loss levels. Choosing an appropriate indemnity period can help ensure these factors are taken into account.
What about disruptions at suppliers' or customers' premises?
Your business’ operations are not only influenced by insured events which occur at your own business premises
For some businesses, damage at a key supplier's or customer's premises could affect normal operations. OUTsurance Business Insurance offers optional cover for the loss of gross profit, -gross rental or -revenue following damage from an insured peril to a supplier's or customer's premises, helping businesses consider risks that may extend beyond their own location.
As businesses evolve, insurance needs can evolve too. Reviewing business interruption cover regularly can help ensure it remains aligned with the way the business operates today, giving business owners greater confidence and peace of mind.