Business Interruption (BI) insurance is a lifeline for practices who are struck by a disaster. However, many overlook this cover which could have business continuity consequences.
The importance of Business Interruption insurance
This insurance reimburses you for financial losses that occur as a result of an insured event and helps you to keep your practice running and be in a position to return to business as usual. If you think about it, it is a crucial part of a practice’s insurance portfolio. However, many either are under insured or don’t insure against this type of loss at all.
A business interruption claim could be made in the event of a flood, other natural disaster, human or technical error and most commonly, a fire or explosion. While the physical damage will be covered by other insurances, the financial losses from not being able to open your practice for example, will not be. This is where Business Interruption insurance is key.
Read more about how Business Interruption insurance works.
According to Insurance Times, only 17% of risk managers in small and medium businesses are “extremely confident” that they have sufficient continuity insurance.
If you are not sure if your practice has the right level of cover, you should calculate how much it would cost you if your practice was out of action, and how long you think it would take to be fully operational after an incident. Future considerations should also be made, such as growth plans and inflation.
Your broker should be able to help you identify what things you should think about.
Why don’t many practices have Business Interruption insurance?
Practice owners who omit this type of insurance completely from their portfolio generally do so for one of a number of reasons, including
- Believing they are covered elsewhere – Some practice owners misunderstand their existing cover, and wrongly believe that financial losses as a result of an incident will be covered under an insurance, such as buildings and contents. These policies will cover physical damage as a result of a disaster, but not potential costs and losses.
- Cost cutting – When budgets are tight, savings have to be made. It is a big risk, but reducing spending through cutting certain insurance covers seems like a logical option, until you experience a major incident.
- It is seen as optional – There are already many mandatory and long established insurances with obvious tangible benefits. As Business Interruption is an optional cover, sometimes less importance is place on it. However, any practice owner who has encountered a disaster, with or without insurance, will understand the stress from losing revenue and the cost of getting a business back on track.
- Not understanding its value – Some practices simply are not prepared for a disaster that severely affects their operation. Without some sort of business continuity plan in place, it is likely that Business Interruption insurance has not been thought about.
For many practices who are insured for business interruption, underinsurance is a serious issue. This is usually down to misjudgement of what financial losses would realistically add up to.
For help to find the right level of business continuity cover at the right price, contact one of the All Med Pro team who are experienced in this area and ready to help.
