Disasters can happen to anyone at anytime, and unfortunately no business is wholly immune. The purpose of Business Interruption Insurance is to provide compensation to the business owner to get the business back up and running, giving you time and peace of mind to do things properly. Ensuring you will not be out of pocket in the unfortunate event that your practice needs to close and your income stream is on hold, proves invaluable to practice owners.
What counts as a “disaster”?
Different policies cover different types of events that could be categorised by an insurer as a “disaster”. This is why it is vital to check your documentation to ensure you have cover that is wide enough for the risks you face. This can often include, but is not limited to:
Claims following flood or fire
Denial of access to property
Failure of public utilities
Escape of water
How Business Interruption Insurance works
Assuming you have the correct BI insurance cover, should you experience a disaster in your practice, then a loss adjuster is typically appointed to assist with your case.
The nature of BI claims can be complex and require some investigation and calculation to work out the extent of the loss involved.
For example, insurer’s may wish to review your appointment book to understand at what capacity the practice is typically working under. This is because sometimes, cancelled appointments can be rebooked in those already vacant slots, meaning no actual loss of gross revenue is encountered.
It may sometimes be possible to work overtime to make up the cancelled appointments. In this instance is it common for the practice to pay staff for overtime work. In this scenario, the practice could claim for an Increased Cost of Working loss.
Check your policy as sometimes insurers do not automatically extend their Business Interruption cover to include this.
Make sure you are not under-insured
Choosing the most appropriate indemnity period for your practice is essential. Many standard policies will offer a 12 month period of indemnity, which may not be sufficient, depending on potential risks to your business.
An insurance broker can discuss your options regarding indemnity periods.
The type of building you occupy will have a bearing on how long it is likely to take to get you back on your feet following a large claim.
For instance, a grade listed property, or property of unique construction, is likely to take longer to get through the building planning stages and source materials than a standard brick-built property.
If your building is of non-standard construction, or is grade listed, we would usually recommend considering a longer indemnity period than 12 months.
Some business owners underestimate the value required for their insurance, sometimes deliberately to save on premiums. Sometimes this is done innocently.
Either way, this can have a detrimental impact on the validity of your policy as if insurers do agree to provide cover, they may offer to do so on a reduced basis.
Providing your insurers with up-to-date information ensures you have sufficient cover
As valuations do go out of date, it is important to get re-valuations on a regular basis.
Speak with your accountant to obtain the latest gross profit figures an ensure they match what is stated on the policy. This will help to determine that your income stream is protected in the event of needing to claim.
When it comes to insurance, having the correct level of cover is absolutely vital, otherwise, you could find your business having to cover the loss of revenue should an unfortunate situation arise.