Business Interruption Insurance

Business Interruption insurance protects against business income losses resulting from the interruption or interference as a result of an insured peril.

It is vitally important that you have the right cover in place and that you have adequate insurance cover to ensure you can get your business back up and running and back to the position before the incident. It is an unfortunate fact that a lot don’t and the majority of those businesses never regain from the loss/incident.

The main benefit of Business Interruption is that it helps to limit the effect that reduced levels of income can have on a business following a loss. This cover will pay for the loss of income and continuing costs at a time when turnover is reduced.

How to ensure you have the right coverage:

- Consider the worst case scenario and considering how long it will take for your business to return to pre-loss levels.

- Consider how long it will take to source and replace equipment.

- Calculate your gross profits (minus expected changes in inventory values, business material use and freight costs etc.) of the business.

- Calculate the costs of moving to temporary premises.

- Check your lease agreement to determine if you are liable for any rental payments.

- Calculate payroll for staff that will be employed and add that to the calculation.

- Calculate any that won’t be retained and minus that as a ‘saved expense’.

- Calculate any other ‘saved expenses’.

- Add the figures for gross profits and, if applicable, moving costs and continuing rentals.

- Deduct the expected saved expenses from the figure.

This is the sum needed for business interruption coverage, which you should purchase from the selected insurance provider.

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