Business Interruption Insurance, also known as BI Insurance, serves as a vital form of protection against unanticipated disruptions for charities, businesses and other organisations. This type of insurance will cover a range of insured perils such as fire, flood, theft and more. Below, our team discuss Business Interruption insurance, what it covers, and why it is so important.
What does Business Interruption Insurance cover?
Business Interruption Insurance provides cover for two primary circumstances:
Loss of Income: If a business’s regular income stream is disrupted due to damage caused by an insured peril, this insurance will compensate for the income lost during the interruption period.
Increased Cost of Working: Cover for any additional expenses that a business may incur while trying to resume normal operations or restore business continuity after suffering damage.
It’s worth noting that BI Insurance also offers options for loss of rental income and loss of gross profit, tailored to specific business needs. Consulting a specialist insurance broker is essential to determine the most suitable cover for individual organisations.
What is an indemnity period and how long should it be?
Some insurers offer a standard 12-month indemnity period (which is the length of time insurers would make payment for), however, this may be insufficient in the current climate due to the increased cost of building materials and the difficulty sourcing tradespeople. To safeguard against extended disruptions, it is advisable to consider at least a 24-month indemnity period. Seeking professional advice tailored to specific circumstances remains crucial for determining an appropriate limit.
Is Business Interruption Insurance the same as Business Continuity Insurance?
There’s often some confusion between Business Interruption Insurance and a business continuity plan.
Business Interruption Insurance is there to financially protect against loss of income and increased cost of working. Whereas a business continuity plan is something that should be in place to ensure the organisation is as prepared as possible for an incident that may disrupt, or halt entirely, its day-to-day activities.
How does Business Interruption Insurance work?
In order for a BI claim to be successful, there must be a legitimate claim of material damage first. This means that business owners need to make sure that they have adequate buildings and contents insurance in place before they can make a business interruption insurance claim. It is possible to obtain both policies from the same insurer, or from different ones – the former may make the process easier to manage, but ultimately, the most important factor is that the policies are in place.
A material damage proviso is a standard component found in every Business Interruption policy. Its primary purpose is to ensure that necessary repairs or replacements for damaged buildings can be financed, enabling the business to resume its operations promptly. This ensures that the business can get back on track before the insurance company settles the claim and mitigates any financial losses that occurred during the indemnity period.
Do I need Small Business Interruption Insurance?
Regardless of the size of a business, BI insurance is vital for protecting against unforeseen disruptions. The need for this cover depends on the nature of the business activities and the potential impact on operations if the premises are damaged by an insured event.
How do you make a Business Interruption claim?
In the unfortunate event of a claim, the first step is to contact your insurance provider’s claims team. If you’re insured through WRS, our designated representative, Emma Jeffery, can be reached on 01206 760780 or you can email Emma@wrsinsurance.co.uk. She will guide you through the claims process and will aim to ensure a swift resolution.
How do I receive a Business Interruption Insurance quote?
Seeking advice from a specialist insurance broker is essential to determine the appropriate cover for individual requirements.
Other things worth considering
Indemnity Periods: Businesses should review the indemnity periods under their BI policy to ensure they have adequate cover for the duration of potential disruptions.
Annual Review: It is crucial for businesses to review their BI insurance annually. Any anticipated increase in income or gross profit over the next year should be factored into the coverage to avoid underinsurance issues.
Average Clause: Like material damage cover, BI insurance often includes an average clause. This means that underinsurance of Loss of Income sum insured can lead to reduced claim settlements. Accurate and up-to-date financial figures are vital to ensure proper coverage.
WRS are specialists in Charity Insurance, Church Insurance and Business Insurance. Our experienced team are passionate about the sector. Our own directors have many years of experience as trustees, so we understand that the risks charities and churches face can be incredibly varied and ever-evolving. For more information call the team on 01206 760780.
WRS is part of the Benefact Group, a charity-owned, international family of financial services companies that gives all available profits to charity and good causes.