Commercial Claims Solutions
Commercial Claims Solutions
Telephone number 0844 409 8780
BUSINESS INTERRUPTION

WHY IT IS SO IMPORTANT

There is much more to protecting the investment in a business than simply insuring the physical assets of the business.

The owners, shareholders, and/or those that have provided investment finance expect an income stream that will cover the financing costs, the costs of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets, etc. The net profit and ongoing expenses including, payroll, management and other staff bonuses and financing costs are all regarded as insurable Gross Income or Gross Profit depending on the policy, but whatever it is called, these expenses should be insured. Without it a business may simply go down the plug hole in the event of a loss.

Business Interruption insurance is at its heart a policy of indemnity. This means that it is designed to put the Insured back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.

Typically following a fire or other insured peril occurring at a business premises some form of interruption to the business occurs. This disruption results in a reduction in insurable Gross Profit. This loss of insurable Gross Profit can occur through two possible causes. The first is a reduction in turnover. In other words a drop in sales will naturally lead to a loss of insurable Gross Profit.

Successfully negotiating claims

BUSINESS INTERRUPTION

WHY IT IS SO IMPORTANT

There is much more to protecting the investment in a business than simply insuring the physical assets of the business.

The owners, shareholders, and/or those that have provided investment finance expect an income stream that will cover the financing costs, the costs of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets, etc. The net profit and ongoing expenses including, payroll, management and other staff bonuses and financing costs are all regarded as insurable Gross Income or Gross Profit depending on the policy, but whatever it is called, these expenses should be insured. Without it a business may simply go down the plug hole in the event of a loss.

Business Interruption insurance is at its heart a policy of indemnity. This means that it is designed to put the Insured back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.

Typically following a fire or other insured peril occurring at a business premises some form of interruption to the business occurs. This disruption results in a reduction in insurable Gross Profit. This loss of insurable Gross Profit can occur through two possible causes. The first is a reduction in turnover. In other words a drop in sales will naturally lead to a loss of insurable Gross Profit.

Successfully negotiating claims

Business Interruption
BUSINESS INTERRUPTION

WHY IT IS SO IMPORTANT

There is much more to protecting the investment in a business than simply insuring the physical assets of the business.

The owners, shareholders, and/or those that have provided investment finance expect an income stream that will cover the financing costs, the costs of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets, etc. The net profit and ongoing expenses including, payroll, management and other staff bonuses and financing costs are all regarded as insurable Gross Income or Gross Profit depending on the policy, but whatever it is called, these expenses should be insured. Without it a business may simply go down the plug hole in the event of a loss.

Business Interruption insurance is at its heart a policy of indemnity. This means that it is designed to put the Insured back in the same position, as near as money will allow, to that which they would have enjoyed but for the loss.

Typically following a fire or other insured peril occurring at a business premises some form of interruption to the business occurs. This disruption results in a reduction in insurable Gross Profit. This loss of insurable Gross Profit can occur through two possible causes. The first is a reduction in turnover. In other words a drop in sales will naturally lead to a loss of insurable Gross Profit.

Successfully negotiating claims

The types of business interruption insurance available

Insurance policies use different terminology and take different approaches to the way they insure for business interruption. The issue for you as the broker is to ensure you match the needs of your client to the covers available and get the most appropriate. It is too important a decision for the ongoing prosperity of your client's business not to ensure that the correct covers are offered. When a claim occurs you do not want to find that you are trying to fit a round peg (your clients claim) in a square hole (the policy cover). It could be disastrous if it does not fit as your client expects and needs.

Under many package policies there is more than one way to insure against financial losses as a result of business interruption. They can be grouped broadly as:

Option 1 – Traditional cover

This section is most often referred to as Business Interruption, Gross Profit, or Gross Income. It is for this type of cover that our e-Cover Calculators have been developed.

Option 2 - Declaration Linked Policies

Declaration Linked Cover is the preferred alternative as it provides cover with a built-in uplift of 33.3% and, most importantly, there is no underinsurance averaging provision in the wording.

Option 3 – Additional increase in cost of working

Additional Increase in Cost of Working only cover. This cover has been developed for a business which has determined that they will not lose any revenue as such following any type of insured loss, but will incur increased costs to continue to operate. This may include relocation costs, overtime to staff, redirecting phones, internet, etc and advertising to customers of the change of address. While there is definitely a place for this cover it often is found lacking when the crunch comes. It is not recommended for use by manufacturers, retailers or in place of loss of rent cover.

Other options

Besides these basic types of cover, each has different options in respect of the additional benefits that they provide. We recommend that you discuss these options with your client and explain the features and benefits of the various products available. In many cases the base wording can be amended to suit your client's and this is where a good insurance broker or adviser comes into their own.

Giving the correct advice

If is imperative to discuss the various options with your client and explain the features and benefits of all the various covers available.

The types of business interruption insurance available

Insurance policies use different terminology and take different approaches to the way they insure for business interruption. The issue for you as the broker is to ensure you match the needs of your client to the covers available and get the most appropriate. It is too important a decision for the ongoing prosperity of your client's business not to ensure that the correct covers are offered. When a claim occurs you do not want to find that you are trying to fit a round peg (your clients claim) in a square hole (the policy cover). It could be disastrous if it does not fit as your client expects and needs.

Under many package policies there is more than one way to insure against financial losses as a result of business interruption. They can be grouped broadly as:

Option 1 – Traditional cover

This section is most often referred to as Business Interruption, Gross Profit, or Gross Income. It is for this type of cover that our e-Cover Calculators have been developed.

Option 2 - Declaration Linked Policies

Declaration Linked Cover is the preferred alternative as it provides cover with a built-in uplift of 33.3% and, most importantly, there is no underinsurance averaging provision in the wording.

Option 3 – Additional increase in cost of working

Additional Increase in Cost of Working only cover. This cover has been developed for a business which has determined that they will not lose any revenue as such following any type of insured loss, but will incur increased costs to continue to operate. This may include relocation costs, overtime to staff, redirecting phones, internet, etc and advertising to customers of the change of address. While there is definitely a place for this cover it often is found lacking when the crunch comes. It is not recommended for use by manufacturers, retailers or in place of loss of rent cover.

Other options

Besides these basic types of cover, each has different options in respect of the additional benefits that they provide. We recommend that you discuss these options with your client and explain the features and benefits of the various products available. In many cases the base wording can be amended to suit your client's and this is where a good insurance broker or adviser comes into their own.

Giving the correct advice

If is imperative to discuss the various options with your client and explain the features and benefits of all the various covers available.

insurance options

The types of business interruption insurance available

Insurance policies use different terminology and take different approaches to the way they insure for business interruption. The issue for you as the broker is to ensure you match the needs of your client to the covers available and get the most appropriate. It is too important a decision for the ongoing prosperity of your client's business not to ensure that the correct covers are offered. When a claim occurs you do not want to find that you are trying to fit a round peg (your clients claim) in a square hole (the policy cover). It could be disastrous if it does not fit as your client expects and needs.

Under many package policies there is more than one way to insure against financial losses as a result of business interruption. They can be grouped broadly as:

Option 1 – Traditional cover

This section is most often referred to as Business Interruption, Gross Profit, or Gross Income. It is for this type of cover that our e-Cover Calculators have been developed.

Option 2 - Declaration Linked Policies

Declaration Linked Cover is the preferred alternative as it provides cover with a built-in uplift of 33.3% and, most importantly, there is no underinsurance averaging provision in the wording.

Option 3 – Additional increase in cost of working

Additional Increase in Cost of Working only cover. This cover has been developed for a business which has determined that they will not lose any revenue as such following any type of insured loss, but will incur increased costs to continue to operate. This may include relocation costs, overtime to staff, redirecting phones, internet, etc and advertising to customers of the change of address. While there is definitely a place for this cover it often is found lacking when the crunch comes. It is not recommended for use by manufacturers, retailers or in place of loss of rent cover.

Other options

Besides these basic types of cover, each has different options in respect of the additional benefits that they provide. We recommend that you discuss these options with your client and explain the features and benefits of the various products available. In many cases the base wording can be amended to suit your client's and this is where a good insurance broker or adviser comes into their own.

Giving the correct advice

If is imperative to discuss the various options with your client and explain the features and benefits of all the various covers available.

It will never happen to me!

Many businesses believe that a loss will never happen to them. The reality is that losses like the ones used in the case studies on this site, occur every day to businesses just like your Client's. Research shows that:

  • Every year 1 in 500 businesses will experience a severe disaster (McGladrey and Pullen)
  • 43% of businesses that experience disasters never re-open and 29% close within 2 years. (McGladrey and Pullen)

Those that do not have full business interruption insurance have a far greater chance of failing. Your client has invested a great deal in their businesses. Protect their investment, and offer the correct cover for Business Interruption Insurance and use this site to get it right! Have you met a business owner who never thought it would happen to them. Will it be your client next? While this may sound trite, that many business managers and owners who see their businesses potentially ruined by a sudden loss never thought it would happen to them. Due in part to the “It’ll never happen to me” attitude, over 90% of businesses that did not have business interruption insurance are likely to fail within two years, some as soon as a few weeks after the fire.

It is a simple fact that few businesses can afford the loss of earnings that accompany a physical loss to premises, stock or equipment.

Business interruption insurance is an inexpensive way to protect the income of a business.

fingers-crossed-mobile

It will never happen to me!

Many businesses believe that a loss will never happen to them. The reality is that losses like the ones used in the case studies on this site, occur every day to businesses just like your Client's. Research shows that:

  • Every year 1 in 500 businesses will experience a severe disaster (McGladrey and Pullen)
  • 43% of businesses that experience disasters never re-open and 29% close within 2 years. (McGladrey and Pullen)

Those that do not have full business interruption insurance have a far greater chance of failing. Your client has invested a great deal in their businesses. Protect their investment, and offer the correct cover for Business Interruption Insurance and use this site to get it right! Have you met a business owner who never thought it would happen to them. Will it be your client next? While this may sound trite, that many business managers and owners who see their businesses potentially ruined by a sudden loss never thought it would happen to them. Due in part to the “It’ll never happen to me” attitude, over 90% of businesses that did not have business interruption insurance are likely to fail within two years, some as soon as a few weeks after the fire.

It is a simple fact that few businesses can afford the loss of earnings that accompany a physical loss to premises, stock or equipment.

Business interruption insurance is an inexpensive way to protect the income of a business.

Check List: Who should have business interruption insurance?

There can be no fool proof checklist for who do and who does not require Business Interruption. But unless your client has vast cash reserves and can afford to fund their own business recovery, (remember 1 in 500 businesses will need the cover), you should strongly recommend Business Interruption insurance if your client ticks any one of the following:

Business risks

  1. Business owns commercial property?
  2. Business is a manufacturer?
  3. Business is a wholesaler?
  4. Business is a retailer?
  5. Business relies on key stock which is not able to be immediately replaced?
  6. Business relies on items of plant and/or equipment which are not able to be immediately replaced?
  7. Business relies on key supplier which is not able to be immediately replaced?
  8. Business relies on key customer which is not able to be immediately replaced?
  9. Business would continue to be liable for ongoing costs such as lease payments on building, vehicles, equipment, or the like even if the business was not able to trade?
  10. Business is financed by debt?
  11. Business would lose revenue if it were unable to operate from the existing building?
  12. Business could keep operating after a loss but with significant increased costs?
  13. It would be difficult to find alternative premises?
  14. Staff are key to the business’s future success?
  15. Business does not have a business continuity plan?
  16. Business is seasonal and cannot afford to lose one peak season?
  17. Business relies on Utilities?
  18. Business does not have sufficient cash reserves to finance a long term disruption?
  19. Business would be liable for contractual fines and penalties if it were not able to supply or take delivery of stock?
  20. Business is required to insure business interruption or loss of rent under a lease or other contract?

Personal risks

  1. My business is my sole or major source of income for me and/or my family?
  2. My business is my major or sole investment?
  3. My business is a major part of my superannuation?
  4. My home is mortgaged to finance my business?
  5. I would not be able to obtain finance to fund a business recovery plan in the event of a major disruption to my business?
  6. My business provides/funds my car(s)?
  7. I rely on my business to fund school / university fees?
  8. My business is the reason I get up in the morning?
  9. I would hate to have to start over from scratch with nothing?
  10. I would hate to go back to working for a boss?

Two final comments you may wish to consider. Did you know that 30% of the claims paid out following September 11, were for business interruption losses. (American Bar Association, 2003). A business has less than 1 chance in 10 of surviving without business interruption insurance.

CASE STUDIES

Fire at a London restaurant

The business is a prominent Restaurant located in the heart of the West End of London and which serves a wide range of customers including many celebrity names. The menu is specialised and the Chefs are experts in their own particular area of cuisine that they prepare as individual masterpieces for serving at table. During […]

Arson attack at a commercial laundry in Devon

In August 2014 we were appointed to deal with a major loss claim following an arson attack on a commercial laundry premises in North Devon. A deliberately set malicious fire caused severe damage to the laundry’s production area including a range of heaving duty machinery including washers, driers and ironers. The extent of damage was […]

Fire at food processing factory in Essex

In October 2014 we were appointed to deal with a major and complex loss claim following a fire affecting a major food production facility. The company involved, a leading international dry goods brand suffered a fire in which a critical part of their manufacturing process plant was damaged by fire, smoke and water. Initial assessment […]

Commercial Claims Solutions

Daws House, 33-35 Daws Lane, London, NW7 4ST

Registered office: Daws House, 33-35 Daws Lane, London, NW7 4ST. Registered in England Number 796

Design:  Good Impressions   |   Content:  We Do The Words

Commercial Claims Solutions

Daws House, 33-35 Daws Lane
London, NW7 4ST

Registered office: London, NW7 4ST. Registered in England Number 796

Design:  Good Impressions          Content:  We Do The Words

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