Leaking pipes or, even worse, a flood, can leave you unable to trade. Whilst your property insurance will cover you for the loss/damage to your premises, have you ever thought how much income your business would lose if you couldn’t trade whilst the damage is being repaired?
Business interruption insurance covers you for loss of profit or revenue, whilst you deal with the aftermath of events like flooding, leaking pipes or other insured events (fire, theft or accidental damage to name but a few) until you’re back to the same trading position you were before the disaster.
With business interruption insurance being so important in safeguarding businesses, it’s worrying that a Chartered Institute of Loss Adjusters study found that 43% of policies are underinsured*, which can seriously affect the ability to recover financially.
When you’re taking out business interruption insurance, there’s two key factors you have to consider - the indemnity period and the limit of cover (also known as the sum insured).
If you need to make a claim, your indemnity period is the maximum length of time you’d need to get your business back to the trading position you were in before the loss happened, i.e. how long do you expect an interruption to your business to last?
Depending on your type of business, the limit of cover is usually established from your annual gross profit or revenue, adjusted to reflect the indemnity period. If underestimated, this will leave you exposed to under insurance and if it’s overestimated, you could end up paying too much for your insurance.
Let’s say for example you’re a restaurant business and you suffer burst pipes during particularly cold weather. As a result, the kitchen and restaurant suffers water damage and you can’t trade. How long would it take you to repair the damage and return to your normal trading levels? This, alongside your estimated gross profit (based on your financial records), will determine the maximum amount you’re covered for.
If you already have business interruption insurance or are thinking of getting some, it’s best to discuss your needs with your insurance broker or with Premierline insurance brokers.
It’s important to protect your business with insurance but here’s a few things you can do to limit the risk and damage that water-related issues could present:
If you’re unsure about your insurance needs or require any risk management advice, speak to Premierline today who are working with Water Plus to help keep your business flowing!
*statistics from http://www.cila.co.uk/cila/special-interests-groups/business-interruption
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