With many small businesses often being the livelihood for their entire families, owners should consider taking out business interruption insurance in order to safeguard against financial loss experienced as a result of incidents such as fire, floods, damage and burglaries.
With statistics showing one in four small businesses would not survive if they had to close their doors for three months, business interruption insurance can get you through a temporary crisis by protecting your cash flow.
Business interruption insurance provides cover against a loss of gross profit and differs from insurance covering business property, equipment and stock. This form of insurance covers the ongoing expenses that need to be paid even if a business is not generating any revenue, like staff wages, supplier invoices, rent or loan repayments.
Business interruption insurance claims can be one of the more tricky types of claims a business can make. Some common issues include:
- The definition of ‘damage’ in the policy.
- Whether the business losses claimed have been the result of the specified damage.
- Damage covering a wide area.
- How the losses should be calculated and getting the values right.
- Settling the indemnity period.
Business interruption insurance is not sold as a stand-alone policy. It can be added on to a business’ Property Insurance Cover or it can be purchased through a comprehensive package policy.
Small business owners worried about insurance premiums should note that most premiums including those covering property, fire, theft and loss of profits are tax deductible.