Sagar’s Business Interruption insurance covers for the loss of income resulting from an inability to trade following a material damage loss. Cover will pay rent, wages and all necessary over-heads as additional expenses, whilst a company is unable to trade.
Business Interruption Insurance: What you need to know
Sagar’s Business Interruption insurance covers for the loss of income resulting from an inability to trade following a material damage loss. Cover will pay rent, wages and all necessary over-heads as additional expenses, whilst a company is unable to trade.
A number of cover extensions are also available for consideration, some of these are often provided as an automatic add on to standard BI policy cover, dependant on the type of policy in force; (please note the following list is not exhaustive).
- Suppliers/Customers Extension
- Utilities
- Denial of Access
- Murder/Suicide/Contagious Disease
- Contract Sites
When considering an appropriate indemnity period, it is important to consider the following;
- Availability of Replacement Machinery & Equipment & Recommissioning time.
- Planning Consents/Enquiries – Obsolete Construction/Modern Methods/Asbestos/Listed Buildings/Access to Site for Plant/Machinery etc.
- Availability of Alternative Accommodation.
- Seasonal Business.
Cover is most often provided based on an Estimated Annual Gross Profit Sum Insured and this can be calculated using the above formula. Once the indemnity period has been chosen, the gross profit sum insured will need to be adjusted for that length of time. In doing this, account must be taken of future business trends.
Cover can also be provided based on gross revenue basis, which gives cover for the whole of the company revenue without deduction. This basis tends to be used in the professional services and sectors where variable costs are limited.
The period during which the business’ results are affected due to a loss or damage, beginning with the date of the loss or damage and ending not later than the maximum Indemnity Period.
The reasonable additional expenditure incurred to avoid or diminish any further reduction in turnover following a loss even if the amount payable exceeds the saving made. Inevitably there may be extra expenses that will not necessarily pass the ‘economic test’ for additional expenses, but may be reasonable in terms of medium-long term interest of the business.
These can include the following;
- Temporary Repair Costs.
- Contracting out work to fulfil supply demand from customers.
- It isn’t just the length of time it might take to rebuild for example, a burnt out factory. It includes the total time during which you think profit/revenue might take to get back to the same level that was being achieved before the loss.
- Sagar Insurances tend to recommend a minimum indemnity period of 24 months.
- Strict Material Damage Proviso.
- Underinsurance/Average – If your sum insured is insufficient at the time of a loss, insurers will apply the average clause. Claim settlement will be reduced proportionately based on the % by which you were under insured.