Pardon the Interruption.
Let’s Talk about Insurance basics 101 – Part 3
One of the most misunderstood parts of insurance cover is business interruption or Loss of Profits insurance, so may be a short explanation is in order?
For most business the cover will be based on “Gross Profit” and in insurance terms that is turnover, less the cost of sales and crucially with nothing else deducted, especially wages as you will need to pay staff as the business recovers.
For service businesses its “Gross Revenue”, which equals turnover and for landlords it can be loss of gross rental income. The key thing is when designing a solution to make sure that the correct measure of income is identified.
The next thing to understand is that in 99.9999% of cases you cannot have a claim for business interruption, unless and until physical damage has occurred. This has to be for one of the identified perils, such as Fire, Flood, or Storm. Crucially and much in the news, disease is not a peril, so could never have triggered a business interruption claim in this respect.
There are however a number of non-damage extensions, but these vary greatly between policies, in respect of what is covered and how much cover is given for each. In some cases the cover is as little as £25,000, but can be as great as £500,000.
These extensions always include the following:
- Failure of public utilities
- Gas, electric and the like.
- Denial of Access
- Damage at neighbouring premises or on access roads
- Damage at supplier’s premises
- Can’t supply you with what you need
- Damage at customer’s premises
- Stops buying from you
- Murder, death or suicide
- Premises closed whilst police investigate
In some cases, there are other extensions but these are not always present and the cover and amounts are generally very small and limited to events happening at the insured premises.
So, if you really want to know what business interruption cover you have, talk to a professional and take the time to understand the cover, #becauseaccidentshappen to nice people all the time.
Feel free to message me, or call the office on 029 20 470 375 for free, no obligation consultation.
It could be the most valuable phone call you ever make.