Business Interruption - Only Half The Story
Mar 25, 2011
If the worst should happen and you lose your building in a fire or suffer a serious flood or other significant damage, your business will be seriously affected as a consequence and you will, undoubtedly, suffer a loss of revenue or profit that you would have generated had the damage not occurred.
When your business has the potential to be affected in this way then one way you can protect yourself is to extend your policy to include Business Interruption cover which will provide cover for loss of Gross Profits &/or Loss of Gross Revenue following an insured loss.
That’s great but that is only part of the story. Whilst Business Interruption cover will assist you to take action to help support the business during the period after the initial damage any action taken will be subject to an “economic limit”, which will vary depending on the size and type of business.
You might, for example, need to hire in temporary buildings or equipment or have contractors work overtime to complete repairs more quickly but find that you are not covered for all of the cost. This is because of an economic limit which means that insurers will pay up to, but not beyond, the minumum necessary to place you back in the same position as prior to the loss.
This will often involve complicated calculations and discussions with your insurers over whether or not certain proposed actions and costs will be likely to be covered or not, at an extremely stressful time for you and your business, and when uncertainty on funding could be a major concern and barrier.
One way to avoid the headache of trying to anticipate whether something will prove economic or not and, even more importantly, ensuring that there are adequate funds available and no risk of a shortfall arising is to extend the Business Interruption cover to include Additional Increased Cost of Working.
Basically you choose a limit of indemnity, say £50,000, and you therefore create a fund which can be used following an insured loss, which is not subject to the previously mentioned economic limit. This essentially gives you and your insurers the flexibility to take whatever reasonable action is required to minimise the impact on the business without necessarily trying to anticipate in advance whether the action will prove economic or not.
For a relatively small premium you will provide your business with much greater flexibility to weather the storm after a loss and it will also alleviate at least some of the stress of dealing with the problem of keeping your business afloat, at a very difficult time.
For further information about Business Interruption Insurance contact David Moffat on 01422 358525.
