Business Interruption Insurance – continuity and stability when it matters

“Unprecedented” and “record shattering” were the headlines in many of the UK’s newspapers during summer 2022 when describing the record hitting temperatures experienced. These headlines were followed by amber warnings issued for London with risk of transport disruption and power cuts due to flash floods and these phenomena are set to continue.

Detailed in carbonbrief.org Met Office chief executive Prof Penny Endersby released a video, warning that “the extreme heat we are forecasting right now is absolutely unprecedented”. She added: “When climate change has driven such unprecedented severe weather events around the world, it can be difficult for people to make the best decisions in these situations, because nothing in their life experience has led them to know what to expect. Our lifestyles and our infrastructure are not adapted to what is coming.”

With these headlines becoming the norm, and weather extremes an increasing threat to our UK high streets, a priority for the independent business owner is to minimise risk, protect your business and ensure stability.

Business interruption cover provides this stability, should you face the significant risk of having to temporarily pause business activity.

Business interruption insurance is often misunderstood. Contents and stock cover will repair damages immediately and replace stock, however this will not cover any financial losses your business suffers, or the long-term interruption to trading momentum.

If your shop, café, restaurant, or bakery is forced to close for any reason outlined in your policy the financial losses for your business, even for a short time, can be considerable. For example a flooded building can take a minimum of 2 months to dry out, or longer in the case of a severe flood.

If you are unable to operate during this period, losing income, as well as valued customers, business interruption cover can help minimise financial worries & help keep your business afloat.

We hope by explaining Business interruption cover you will have a better understanding of why it is an essential part of your policy.

Examples of what Business interruption coverage can cover

·       Loss of revenue or loss of income (Expression Insurance offer loss of income)

·       Employees’ salaries

·       Cost of relocating your business

·       Mortgage or rent payments

·       Wages for employees

At Expression Insurance we have kept things simple to provide you with peace of mind.  We cover 'loss of income' resulting from an incident as standard, providing a maximum limit for gross revenue over a 12-month period (the actual amount paid is calculated on your business performance, representing as closely as is reasonable and practical what the gross income would have been had a claim not occurred).

Some insurers only provide cover for 'loss of profit' which will pay you much less than 'loss of income’ and could be tricky to demonstrate in the event of a claim.

We will provide cover for the additional expenses you incur, such as moving to a temporary location to continue trading and also pay for increased cost of working (this is any amount incurred to avoid the reduction in turnover) provided the amount of additional costs are less than the reduction in revenue saved by incurring these additional costs.

If there is a material damage claim from one of the insured perils,

·       Fire

·       Lightning

·       Earthquake

·       Explosion

·       Aircraft and other aerial devices or articles dropped from them

·       Malicious persons

·       Storm, Flood, Escape or water from any tank apparatus, pipe, or sprinkler system

·       Impact

·       Falling trees

·       Escape of fuel from any fixed oil heating installation

Expression Insurance will pay for the loss of income your business suffers as a result of interference or interruption in the business caused by that insured incident.

Indemnity period – This represents how long it would take to get your business up and running again in the event of a claim. In some cases, insurers provide longer indemnity periods, appropriate for customers who own the buildings and would need to rebuild before business operations could restart.

Turnover - At this point it’s important to consider your turnover as this links directly to your business interruption insurance. The income you receive will reflect what is paid out in the event of a property loss that’s caused by one of the insured perils and interrupts your business (subject to the maximum limit specified in the schedule).

Examples of business interruption exclusions

Not all policies offer like for like cover, so it is important you take time to read through your policy documents, taking note of the exclusions particular to your policy.

The following are examples of key risks excluded under business interruption insurance

· Acts of terrorism

· Communicable diseases caused by bacteria or viruses spread through contact with bodily fluids, blood products, contaminated surfaces, or air transmission (pandemics)

If your business has permanently ceased trading or a liquidator appointed

Best practice to minimise the risk of business interruption

Small business owners need to fulfil their part of the insurance bargain too, by taking reasonable precautions to prevent bad things happening. This means having appropriate precautions in place, maintaining your property properly and obeying the law – especially in terms of health and safety. If both sides do the right thing, insurance should not be complicated.

Business interruption can be extremely costly and implementing some of the following simple actions will help minimise impact should the worst happen.

Business continuity strategy – A written strategy detailing how your business will manage various scenarios by minimising risk and protecting your business. This should include a disaster recovery plan that all members of staff are aware of

Risk assessment exercise – Identify and list all the potential threats to your business and implement a plan to minimise these risks

Protect against fire and flood - Install a sprinkler system to prevent fire damage and ensure your fire and smoke alarms, extinguishers and fire doors are in working order. In areas at risk of flooding , a stock of sandbags is advisable

Install and maintain a security system – To prevent crime and vandalism

Digital data protection – Ensure all firewalls and virus protections  are up to date. Password protect systems and regularly back up all important data to secondary location

Regular maintenance of machinery – Ensures all equipment is in working order and prevents loss of use

In summary, if your shop, café, restaurant or bakery is affected by an unexpected event, Business interruption insurance aims to put your business back in the same trading position it was before the event occurred as quickly and with minimal disruption as possible.

Get in touch today if you want to  reduce your risk of business interruption, or find out more about how Expression supports independent business owners who love their business visit www.expressioninsurance.co.uk