Business Interruption Indemnity: Is 12 Months Enough?
A lot can happen in 12 months. For many businesses, 12 months is the maximum period of time that their insurer will pay out while they get back on their feet following a disaster. 12 months seems like a long time; but are you sure it’s enough time for your business?
Business interruption insurance is a key part of any good commercial insurance plan. Obviously making sure physical assets such as stock and property are covered is crucial but it’s often business interruption insurance that makes the difference in ensuring the survival of a business following a disaster. After all, repairing, restocking or rebuilding your business could take a long time and every day that passes before you reopen your doors is another day that you are not earning.
Business interruption insurance can help support your business during a difficult time by paying out for earnings lost while you get back on your feet. But the amount of time it takes to get back on your feet can vary, and you’ll want to make sure your business is covered for the right amount of time.
The length of the indemnity period of a business interruption policy can vary, usually starting at 12 months and going to 36 months and beyond. Often a period of 12 months is included as standard and for many businesses this might be enough.
However the amount of time it can take to get back on track can vary substantially from business to business, and as such, you should strongly consider whether a 12 month indemnity period would be enough to support you if disaster strikes. Rebuilding a severely damaged property can take a surprisingly long time as clearing a site, appointing architects and constructing a building is not always a quick process – especially if your property is a listed building and you require the correct planning permission to be agreed. Additionally, specialist pieces of plant or machinery can have a delivery lead-in-time of six to eighteen months, with additional time to install or commission. And that’s not including any customers you might lose for good while your doors are closed, and the loss of business this would cause.
It’s because of these difficulties that business interruption insurance is so important to get right. If you think it would take your business longer than 12 months to get back to normal following a fire, flood, or even a cyber attack, could it survive without a longer period of indemnity? 12 months may seem like a long time but it will feel even it takes two years to rebuild your business and that’s how long you’re left without any form of financial support.
To discuss a business interruption policy, and to help decide what your period of indemnity should be, get in touch with me today.