Business interruption insurance

Many businesses mistakenly believe they’re covered by building and contents insurance – but how do you protect against lost revenue if you can’t trade?

Many businesses believe that building and contents insurance will cover them for any loss or damage to their business, not factoring in the financial impact of long-term closure. Business interruption insurance protects you against that risk.

But what is business interruption insurance? What does it cover? And how much do you need?

Does my business need business interruption insurance?

You never know when disaster is going to strike. A disaster can mean forced closure and forced closure can mean a loss of income. Business interruption insurance covers you for the financial cost of closing and rebuilding your business.

Even if closure is relatively short-term, failure to take out a business interruption insurance policy could leave you exposed to serious financial risk

What does business interruption insurance cover?

A business interruption insurance policy will typically cover the following:

  • Loss of profits – this covers your business that would have been earned during closure and is based on previous financial statements
  • Fixed costs – covers any operating costs still being incurred during closure based on previous bills
  • Temporary location – covers the expense of operating your business from a temporary location
  • Commission and training cost – covers the cost of training those who operate the machinery replaced by your insurer during closure
  • Extra expenses – reimburses you for any expenses beyond fixed costs that enable the business to keep operating during closure
  • Government mandated closure – covers you for closure during government-enforced curfews or street closures etc.

You can also take out a contingent business interruption insurance policy that protects you in the event that one of your suppliers or customers isn’t able to conduct business with you.

What won’t it cover?

Generally a policy will cover the period from the date your business is forced to cease trading until the date your damaged or unavailable property is returned to its previous state and ready to function again. Any time your business does not trade outside of this period is not covered.

It will not cover you for any physical loss or damage to your property, equipment or stock, which can be covered by business building insurance and business contents insurance.

How much business interruption insurance will my business need?

Business interruption insurance is usually included or offered as an optional extra to a business building insurance policy, a contents insurance policy or other business insurance packages.

How can I choose a provider for business interruption insurance?

This depends on the nature of your business and what risks you may be exposed to. Using an online comparison site will help you find a comprehensive and appropriate policy – but don’t just opt for the cheapest as it may not

There are specialist policies available to cover cyber threats such as viruses, hacks or any other technological interruption to your business.

What other insurance does my business need?

By law you need to get employers liability insurance to protect you in the event of an accident or illness befalling one of your members of staff. To fully protect your business you should also get:

  • Business contents insurance – covers you for loss or damage to your business equipment or stock
  • Building insurance – protects the bricks and mortar of your business from damage
  • Motor Insurance – any business that operates a vehicle needs to be covered, either by individual policies or fleet cover