November Issue 30 - Flipbook - Page 31
Business Interruption – are you
insured for long enough?
The right Business Interruption cover can mean the difference between getting
back up and running and going out of business if you’re unfortunate enough to
suffer a major incident.
Whilst many operators purchase this insurance, they often don’t buy enough cover which can lead to being underinsured.
This means that the insurance won’t protect a business throughout the full cycle of a claim, leaving businesses high and
dry when cover is needed most.
To explain this further, the purpose of Business Interruption cover is to maintain the turnover of the business following an insured incident. Cover is
limited by time, referred to as the Indemnity Period, as well as by the Sum Insured. The Indemnity Period starts on the day of the insured incident.
It will end when:
the business has made a full recovery to where it would have been if the incident hadn’t happened, or
the day the indemnity period ends, whichever comes first.
So, if the indemnity period is too short, cover will end before the business is back up and running and the operator will be left to face the rest of the
recovery without any financial support from insurance cover.
Let’s take a look at some of the common timescales
following an incident:
Three months - Following a major incident, for example a large
fire, insurers will carry out a forensic investigation to establish the
cause before cover can be confirmed and any work can start to
reinstate buildings etc. To make the building safe, gain access and
conclude this initial report can take an average of three months.
Six months - Any significant work on the premises will need
planning permission. The average time to obtain this, including
time for plans to be drawn up, is six months.
Nine months - After the incident, it’s likely that work can start on
repairing or rebuilding the premises. Whilst the recovery operation
may have been able to continue on a whole or part basis, any
vehicle repair, storage, sales or other activity may not have been
possible unless alternative premises have been found on a shortterm basis in the local area.
15 months – A rebuild of premises could take six months, meaning
the operator can begin to kit out premises around 15 months postincident.
16 months - Provided that machinery lost in the initial incident has
been ordered and has arrived, six weeks should be allowed for
fitout and commissioning.
Whilst business can resume as usual, it can take a business many
additional months to fully recover to the position they were in before
the incident occurred. Remember, Business Interruption insurance can
provide cover for Loss of Gross Profit until that Gross Profit is no longer
affected by the incident – the cover does not stop the moment the
premises is reinstated.
12 months’ cover is never enough. At Aston Lark we always recommend
a minimum of 24 months, but proper consideration needs to be given to
how long it would take for your business to recover.
If you’d like to discuss your
Business Interruption cover,
give me a call on
01732 386766 or email
Aston Lark Limited Registered in England and Wales No: 02831010
Registered office: Ibex House, 42–47 Minories, London EC3N 1DY
Aston Lark Limited is authorised and regulated by the Financial Conduct Authority.