THE TYPES OF BUSINESS INTERRUPTION INSURANCE AVAILABLE
Insurance policies use different terminology and take different approaches to they way they insure for business interruption. The issue for you as the broker is to ensure you match the needs of your client to the covers available and get the most appropriate. It is too important a decision for the ongoing prosperity of your client's business not to ensure that the correct covers are offered. When a claim occurs you do not want to find that you are trying to fit a round peg (your clients claim) in a square hole (the policy cover). It could be disastrous if it does not fit as your client expects and needs.
Under many package policies there is more than one way to insure against financial losses as a result of business interruption. They can be grouped broadly as:
OPTION 1 – TRADITIONAL COVER
This section is most often referred to as Business Interruption, Gross Profit, or Gross Income. It is for this type of cover that our e-Cover Calculators have been developed.
OPTION 2 - DECLARATION LINKED POLICIES
Declaration Linked Cover is the preferred alternative as it provides cover with a built-in uplift of 33.3% and, most importantly, there is no underinsurance averaging provision in the wording.
OPTION 3 – ADDITIONAL INCREASE IN COST OF WORKING
Additional Increase in Cost of Working only cover. This cover has been developed for a business which has determined that they will not lose any revenue as such following any type of insured loss, but will incur increased costs to continue to operate. This may include relocation costs, overtime to staff, redirecting phones, internet, etc and advertising to customers of the change of address. While there is definitely a place for this cover it often is found lacking when the crunch comes. It is not recommended for use by manufacturers, retailers or in place of loss of rent cover.
Besides these basic types of cover, each has different options in respect of the additional benefits that they provide. We recommend that you discuss these options with your client and explain the features and benefits of the various products available.
In many cases the base wording can be amended to suit your client's and this is where a good insurance broker or adviser comes into their own.
GIVING THE CORRECT ADVICE
If is imperative to discuss the various options with your client and explain the features and benefits of all the various covers available.