If you run a business and an unexpected event means it abruptly ceases operation, having business interruption cover in place can help your business survive.
Here's all you need to know.
Business interruption insurance, also referred to as business continuity insurance, is a distinct type of business insurance policy that provides specific cover for losses sustained by your business when an unforeseen event like a burglary, fire or flooding, stops your business from trading as usual.
Many business owners are unaware of the existence of this niche type of insurance cover and some erroneously think that business interruption losses are automatically covered by buildings and/or contents insurance.
Note: Not all business interruption insurance covers pandemics.
Business continuity insurance specifically covers loss of business profit and income when a sudden event occurs (usually fire or flood damage to a building), meaning that a business can no longer function as normal.
This type of insurance does not cover anything else such as the cost of repairs to damaged buildings or replacing contents (this is covered by building and contents insurance); it simply covers loss of profits.
Claims for profits lost through business interruption can be made as a result of:
The UK government has stated that if your insurance policy includes wording that states cover applies to both:
then you should be able to make a claim on your insurance if it has suffered loss of profits due to the Coronavirus pandemic.
You should read the small print of your insurance policy to see whether you might be able to make a claim or if there is a specific exclusion clause in your policy relating to pandemics meaning a claim for covid-19 losses is not possible.
The House of Commons’ Library recently reported that many business interruption insurance covid-19 claims have not been successful, leading to small businesses demanding government action and complaints being made to the Financial Ombudsman Service (FOS).
Many new insurance policies now exclude cover for the Covid pandemic, so always be sure to read and understand the terms of your policy.
Business interruption means that for a considerable period of time (typically between 12 and 36 months), a business is unable to operate, carry out its usual business or earn any profit due to a natural disaster and/or other unexpected events.
Yes, this type of insurance is designed specifically to cover loss of profit and earnings as a direct result of a business being unable to trade.
The Financial Conduct Authority (FCA) provides detailed guidance on their website on how to make a business interruption claim, with particular reference to Covid-19 related claims.
Here’s a summary of the FCA’s guidance:
For further advice on what to do if you’ve already claimed or complained, and for guidance about what you can claim for, visit the FCA’s FAQs page.
The indemnity period (i.e. the period of time that you can claim compensatory cover for) can last anywhere from between 12 and 36 months.
To calculate business interruption, you will need to:
Whilst larger businesses can expect to pay much more expensive insurance premiums, according to nimblefins.co.uk, business interruption insurance fees can start from just £82 a year for a small business.
If you run the type of business that would lose all or most of your business income should your business abruptly cease operating, then business interruption insurance is most definitely worth it.
Business interruption cover is typically included in business insurance policies for retail businesses, hairdressers, restaurants, pubs and offices etc, but you should always check if this cover is definitely included and how much cover you have.
However, business interruption cover isn’t included in all standard business insurance policies and is very often an add-on you will have to pay extra for, so check this with your insurer if you're not sure.