Business interruption insurance explained
Businesses can face a range of disruptions everyday which can impact their performance. Part of the preparation can be having the right insurance that covers you for business interruption or loss of income.
Find out what is a ‘business interruption’, including how it can impact your business, and how to safeguard against it.
What is a business interruption?
Business interruption can take form as a major fire at your premises.
This may result in the premises being damaged or your stock being wiped out.
Standard shop insurance or small business insurance may cover you for the damages and the loss in stock. But, what about the period of time that the business was unable to trade for?
If, for example, your business had to be closed for two months, your business may suffer a significant loss of income over that period of time.
Having a business insurance policy that only covers your contents won’t protect loss of income. So you need to make sure that you have a policy that covers you for business interruption or loss of income following an insured incident to your buildings or contents covered under your policy.
With Direct Line for Business, you get this as part of your Shop Insurance or Small Business Insurance, as standard.
Expect the unexpected
When you consider the number of reasons that your business might have to be closed, it is certainly safer to have cover for that loss of income.
Various obvious factors such as fires, storm damage, flood damage, or leaking pipes could cause your business to be shut. But other factors, such as the failure of public utilities, damage to property in the vicinity of your premises preventing you access or bomb scares could result in you not being able to trade without any damage to your premises or property. These situations are usually covered as extensions to the Business Interruption cover.
This is the last thing you would want if you have to close your pub in the height of summer or your shop has to close for business in the run up to Christmas.
Direct Line for Business offers loss of income or business interruption cover as standard on the following policies - Shop Insurance, Licensed Trade Insurance, Guest House Insurance, Office and Surgery Insurance and Business from Home Insurance. The type and levels of cover offered varies from policy to policy. But there are options to increase these, allowing you to select the appropriate cover for your business.
How to prepare for business disruptions
Businesses have to face a range of disruptions everyday. These can include train cancellations, road closures, industrial action, bad weather, staff illness, and even computer viruses that slow down their network.
Such disruptions can impact businesses in many ways, from minor inconveniences to major problems. Fortunately, there are a number of different ways that businesses can prepare themselves for these issues.
1. Have more than one distribution channel
Having alternative distribution channels, for example multiple courier firms, is one example of where you can plan for business interruptions.
Taking the recent UK postal strike last Christmas as an example, the Federation of Small Businesses said that smaller enterprises were some of the biggest losers, because they did not have contingency plans for postal failures.
The federation said 94% of its members exclusively use the Royal Mail, many to send vital cheques and invoices through the post, which is the livelihood of every business. The remaining 6% who use alternative mail carriers often rely on the Royal Mail for the last mile, and as a result, thousands of small firms were left stranded.
2. Be flexible
Flexible working practices and ‘hot-desking’ centres are another way that you can ensure that the business continues to function if your main offices can’t be used.
Having good internet connections at home and web-based access to the company’s email, databases and applications could also help if you find yourself unable to work from your regular offices.
There are also a number of software services that provide important applications over a web connection, so you can carry on working from anywhere.
3. Expand your communication
Alternative methods of communication are also handy in the event that you have landline problems.
Every business communicates in different ways, but it’s worth considering a good communication strategy that covers landlines, mobiles, email, instant messaging, web-based collaboration and home working.
4. Do you have loss of income insurance?
However you plan, unforeseen circumstances can arise that affect the business. So make sure you consider business interruption insurance as part of your strategy. It can help make sure you aren’t out of pocket following an incident.
To find out more about small business insurance, click here