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Weighing The Worth: Is Business Interruption Insurance a Smart Investment for Your Company?

By Darragh Timlin on April 23rd, 2024

Business interruption insurance is an important consideration for any business owner looking to protect their company against unexpected events. This type of insurance can cover loss of income and operating expenses if your business premises are damaged and you are unable to trade for a period of time. 

But is it worth the investment? We weigh the pros and cons.

What Business Interruption Insurance Covers

If your business suffers property damage from causes like fires, storms or flooding, standard property insurance will cover repair and replacement costs. But while your premises are being rebuilt, you may struggle to cover ongoing expenses or replace lost income without business interruption insurance. 

This type of business insurance can pay for:

  • Lost income – Compensates for financial loss sustained during the disruption.

  • Operating expenses – Helps pay your fixed costs like payroll, loans and leases until you resume trading.

  • Temporary location costs – Covers expenses of setting up a temporary premises if needed.

  • Extra expenses – Funds any increased costs of operating during the restoration period. 

A business interruption insurance claim can be crucial to covering the cost of temporary losses and getting your business back on track.

Key Factors Impacting Premiums 

As with any insurance cover, a number of factors determine your business interruption insurance premium:

  • Business Interruption Coverage limit – The maximum claim payout affects premiums, so calculate potential lost income carefully.

  • Length of disruption – You can opt for limited cover periods like 3-6 months. Longer time frames cost more.

  • Additional covers – Extensions like contingent business interruptions due to supplier failures cost extra.

  • Excess amount – Choosing a higher excess reduces premiums but increases your initial outlay per claim.

To strike the right balance between cost and adequate protection, work with an insurance broker to evaluate risks and exposures specific to your business.

The Case for Business Interruption Insurance

While premiums represent an added expense, there is a clear case for business interruption cover as an essential insurance for many businesses:

It can prevent bankruptcy

The ability to make a claim for lost income and finance expenses during shutdowns saves many companies from going under. Without business interruption insurance, the combination of income loss while major fixed costs like rent, loans, payroll and taxes continue to accumulate pushes enterprises towards bankruptcy. 

However, timely payouts covering lost profits and operating expenses provide a vital cash flow lifeline. 

Allows focusing on recovery

Knowing insurance policies cover lost income as well as increased expenses related to disaster response, repairs, temporary relocations and more means business owners can devote full efforts towards restoration rather than scrambling to stay financially afloat. 

Business interruption insurance alleviates cash flow pressures and provides breathing room to piece back together operations impacted by covered incidents. Ultimately, going without cover leaves you fully exposed to potential earnings losses and extra costs from incidents disrupting your business operations.

Exclusions to Note

While business interruption policies are comprehensive, some exclusions can apply:

  • Natural wear and tear – Gradual building deterioration and equipment breakdowns are not covered.

  • Pre-existing damage – Only new property damage occurring during the policy period qualifies for claims.

  • Cyber incidents – Data breaches and malware attacks may  require tailored cyber insurance cover.

Review policy terms closely and address any gaps with suitable extensions or specialty covers.

Get a Quote for Your Business 

Here at Brisco Business, we offer tailored business interruption insurance quotes across a range of top UK insurers. With decades of experience supporting companies across all sectors, we advise on coverage levels, risk factors impacting premiums and policy extensions to protect your business against disruptions. Get in touch today to discuss your needs.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin

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