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Do I need Business Interruption Insurance?

Monday, July 08, 2019

 

Content provided by Darwin Clayton, the NAS Preferred Insurance Broker and our Principle Sponsor.

It’s often a repeated claim that 80% of businesses affected by major incidents close within 18 months and while the truth behind that statistic can be tricky to verify, it’s easy to see how such a thing could be true.

While incidents like minor break-ins or vandalism might be expensive but ultimately surmountable headaches, if your business were to suffer severe flooding, or fall victim to arson, things could be very different. Your premises would have to be repaired and redecorated, potentially including fitting new carpets and windows, and reordering new stock or equipment. This can come at great expense, but thankfully is typically covered by a commercial building and contents policy, so if this is in place, these costs shouldn’t prove too difficult to overcome.

What you may not have considered when insuring your business is the thing that is responsible for many of these closures – business interruption. The ensuing rebuild or refurbishment can be time consuming, with the real costs often measured not in expense but in loss of income.

If your property is flooded it could be weeks or even months until it is habitable again and even if the cost of your repairs is covered by your insurance, every day that you are closed is a day that potential earnings have been lost. Extended closures can also affect business relationships with suppliers and partners, and drive customers elsewhere, all of which can impact your ability to reopen.

Incidents like this are why business interruption cover is crucial for your business. Business interruption insurance covers the loss of earnings you would otherwise suffer while you repair, restock and rebuild following an incident and it’s this cover that proves absolutely vital in keeping businesses afloat during difficult times.