Business Interruption Insurance: A guide for small business

What is and isn’t covered by business interruption insurance?

Business Interruption Insurance is something at the forefront of small business owners minds now right, facing closures due to the Coronavirus Pandemic and Government enforced lockdown.  Many people are turning to their insurance policy, as in the back of their mind they had cover for “loss of profit” or “business interruption”.

However, sadly for many, their policy probably doesn’t cover what they think it does.

Business Interruption Insurance is usually an add on to the Buildings Insurance and will usually only pay out on an Event of Damage to the Building itself.

It is intended then to pay loss of profit, for example, if your building or workplace is unusable due to say a fire.

Policy wording of course varies from insurer to insurer, but one that I have seen says:

“Any loss… resulting from interruption of or interference with the business in consequence of loss destruction or damage to the Property.”

So in order for the Business Interruption Insurance to even start to kick in, there needs to be such damage – eg a fire, explosion etc.

Some insurance policies I have seen have cover for loss resulting from “any occurrence of a Notifiable Disease” and in which case, depending on the wording of the specific policy, there may be a claim to be made for loss.  The next step is to consider what the policy covers. In the example above, the policy defined Notifiable Disease as “any human infectious or human contagious disease…” and so diseases such as Covid-19 Coronavirus, might be included.

Assuming then you’ve got cover in place, then what losses will it pay out?  Again, that depends on the Gross Profit Figures usually included in the policy documents themselves, which could be any amount and so it is important to get these figures right.

Ultimately, for any small business looking at insurances, I would recommend speaking to an ABI approved, FCA Regulated Insurance Broker. 

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