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Business interruption insurance – what does it actually cover?

03 April

Many insurance policies come up for renewal in April and it would appear insurers have been making late changes to the terms they are prepared to offer on a range of commercial policies due to the coronavirus outbreak.

 This may leave you in the position where you are questioning the renewal of your insurance or are unable to make a business interruption claim… or both!

 

Take control of your insurance

Insurance is a material overhead and is likely to go up in price due to the Covid19 outbreak. Insurers are like any other business when confronted with an unexpected loss, they have no other option but to increase their prices to suffer the blow.

Given the current climate, now may be the time to review your insurance and question what you are getting out of the policy balanced against the cost of the yearly premium.

Businesses have a statutory obligation to carry Employers Liability Insurance and Third-Party Motor Insurance only. You may have a contractual obligation to carry other insurances, however this is something that can be negotiated with the other party.

A practical step would be to review all the policies you have in place and make a note of the renewal date, what risk the policy covers, what the annual cost is, what is the excess, what is the limit of the indemnity, if you have ever claimed on the policy, is there a change in circumstances i.e. has the risk disappeared and are there any mitigation steps you could take to reduce and risk you insure.

Based on the answers to the above you may decide to decline renewal or cancel the policy especially if it is going to cost your business a small fortune to continue with a policy that may not cover you for risks, which may not even pay out or you may no longer actually need.

To assist in making this decision you may do the following:

1.      Review your contractual relationships and fix appropriate indemnity provisions and liability caps as this will reduce your exposure.

2.      Utilise Health and Safety Consultants or any other relevant training to ensure that compliance with best practise in the workplace which would reduce the likelihood of incidents occurring.

3.      An accountancy exercise to look at the strength of your businesses balance sheet and its resilience to risk exposures.

4.      Consider self-insurance either up to a certain sum or over a certain sum (on the basis it is unlikely to kick in)

5.      Insure for large risks only

We would recommend that you engage with a reputable broker and accountant, if necessary, to undertake this task. Whilst not a decision to be taken likely undertaking this exercise may reduce your overheads and free up monies that can be better spent in your business.  For all related enquiries, please contact a member of our commercial team on 01254 828 300 or email disputeresolution@backhouses.co.uk

 

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