Business interruption insurance for small business

Any business that would lose money if it had to close suddenly and unexpectedly should consider business interruption insurance. It's often included as an extra on a business insurance package rather than sold on its own, so it's worth checking if it’s available to you. 

You might want to think about business interruption cover if: 

• You run your business from a shop, store, office or site and rely on busy footfall or bookings to make money. 
• You trade from multiple locations and a problem at one site could hit your income 
• You hold stock, equipment or premises that would be costly to replace or repair 
• Your customers or suppliers depend on you trading as normal, day to day 

Policies taken out by shops, salons, pubs, restaurants, offices and surgeries commonly include business interruption cover as part of the policy, but this differs by insurer, so always check your own policy schedule together with your policy wording to see what's included, and to what level. 

To give you an idea, here are some examples of business interruption claims that may be covered by the right BI cover. 

• A fire in your building - If a fire next door to you on a high street or retail park, for example, causes material damage to your building and means you have to temporarily close, business interruption cover could help with costs during this time. 
• A gas explosion on your road - If a gas explosion closes your road or damages your building, you may need to close or relocate while repairs are carried out. Business interruption cover could help with the money you lose during this time. 
• Flooding at a supplier's premises - If your main supplier's warehouse floods and you miss your vital stock delivery, and this stops you trading, business interruption insurance could help cover the loss during this time. 

The key thing to remember is – business interruption is designed to help you get back on your feet – back to where you were before the ‘interruption’ happened. What’s actually covered will depend on the type of cover you take out. 

Normally, your policy will set a maximum indemnity period — this is the length of time your business interruption cover will generally pay out for. This is usually 12, 24 or 36 months, depending on your policy, and should reflect how long you think it would realistically take your business to recover.

Knowing what's excluded matters just as much as knowing what's included. Common exclusions to look out for may include, but are not limited to: 

• Damage without a valid claim - Most policies only pay out if there's a valid claim for material damage on your main policy, such as fire or flood. This basically means visible damage to your property, stock or contents. If an insurer can’t see there is damage from an insured event, you may not be able to claim. 
• Pandemics and notifiable diseases - Standard policies often exclude pandemics, and many only cover a specific list of diseases. Always check your own policy wording if this matters to you. 
• Poor planning or negligence - If you have to close because of something you could have prevented, such as ignoring shop maintenance issues or not replacing old equipment your insurer may not pay out. You should always keep your equipment well maintained. 
• Supplier going bust without damage - If a supplier lets you down for other reasons, like they go bankrupt, this usually isn't covered unless this has been specifically added to your policy.

No. Business interruption insurance isn't a legal requirement in the UK. Employers' liability insurance is a type of business cover you must have by UK law if you have anyone working for you, even part-time or temporary workers. Business motor cover is also legally required if you drive a vehicle for business purposes. At Bionic, we are unable to cover your vehicle but it’s likely we can cover your business operations. 

Whether you take out business interruption insurance with your policy is completely up to you. You should consider it if a sudden, unexpected closure due to material damage would stop you trading, and you are concerned about potentially losing profit or income.  

There are other risks that come with closing up shop. For example, you might lose loyal customers who go elsewhere and don't come back, or you might miss out on big contracts to your competitors. Cover like this could give you a bit more breathing room while you get back on your feet and start trading again. 

There's no single answer here, because your business interruption insurance costs depend on your unique business, your level of cover and the insurer you choose. You should talk to a broker to see how much it would cost. 

Factors that could affect your premium include: 

• Size - A bigger business generally means bigger potential claims, which could mean you see a higher premium. 
• Indemnity period - The longer your chosen indemnity period, the more your cover is likely to cost. Remember, this refers to how long your cover would pay out for. 
• Your trade - Some trades may face a higher risk of disasters causing material damage than, such as manufacturing plants with large warehouses of damaged stock or businesses that rely on expensive machinery that could suffer material damage due to a flood, fire or storm damage. 
• Claims history - If you've made a claim before, or had one made against you, it may affect your future premium.