No one ever expects to be the victim of a disaster; however, the last few years have reminded us that events can change in weeks, days, or even hours.
As a business owner, it is important to protect your business from the problems caused by nature or humans that have a high chance of affecting your ability to trade for a period of time.
Business Interruption Insurance safeguards your organisation against insolvency resulting from an unexpected event.
In this article, we look at what business interruption insurance covers and whether it could be right for your business.
What is covered by Business Interruption Insurance?
It is crucial to differentiate between what building and contents insurance products cover and the coverage provided by the Business Interruption Insurance.
The former puts the initial damage right but will not pay out for the financial losses you may sustain due to being unable to trade.
For example, if your shop is damaged by fire, rioting, or a flood, building and contents insurance products will cover the replacement or repair of your business’s premises and stock.
But how do you pay your bills if you cannot trade for months whilst the physical damages sustained are evaluated and repaired?
Business Interruption Insurance covers the costs of these losses, plus the loss of income (commercial profits) you would have received if you were able to operate.
How do I claim Business Interruption Insurance?
Business Interruption claims are made through your insurance provider, usually done online or by phoning or emailing the customer service team of your insurance company.
Is Business Interruption Insurance taxable?
Yes, you will be taxed for a Business Interruption Insurance claim. You will need to pay tax on your Business Interruption Insurance payout if it is or forms part of your taxable income.
How is Business Interruption Insurance regulated?
Like most common insurance and financial products in the UK, Business Interruption Insurance is regulated by the Finacial Conduct Authority (FCA).
As well as regulating insurance providers, the FCA also offer guidance and support for policyholders to know their rights. For example, the FCA have a policy checking tool that helps policyholders understand what Business Interruption Insurance can be used for and exemptions specific to their policy.
Is Business Interruption Insurance worth it?
Whether or not purchasing Business Interruption Insurance is worth it depends on the type of business you run.
If a fire destroys your premises, could you still operate? If you hold a lot of stock and/or require a large building with specialist equipment, the answer is probably no.
Therefore, it will be wise to mitigate your risk of falling into insolvency should the event occurs by taking out Business Interruption Insurance.
Get legal assistance from LawBite
LawBite has experience helping startups and small businesses achieve their commercial ambitions and regulatory compliance. To find out how we can support you concerning business insurance matters, book a free 15-minute consultation or call us on 020 3808 8314.
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