Why understanding your Indemnity Period is so important for your business

Business interruption insurance, also known as loss of profits, covers you against the loss of profit or revenue, should your business suffer from a disaster. Most businesses are aware that having this insurance in place is essential to protecting them, but not all understand the real importance of the indemnity period.

The indemnity period is the length of time compensation is payable to you whilst your business gets back on its feet.

Most policies offer a standard 12 month indemnity period but have you considered how long it may actually take to get your business back to the position it would have been in, had the loss not occurred? In our experience as an independent broker it can take much longer and evaluating this is something we can help you with.

So what could close your business down?

A flood, fire or vandalism.

Loss of utilities.

An explosion at a neighbouring building which closes access to your premises.

Damage to a supplier premises that prevents you from trading.

How to assess whether you have a suitable indemnity period? How long would it take your business to recover and be back to normal trading?

If you had to replace or repair machinery or equipment how long would it take? Are they specialist pieces, what is the lead-time, will they have to be specially commissioned?

If your premises were completely destroyed how long would it take to rebuild them. Planning permissions, building regulations, site clearance would all have to be factored into the time allowed.

Could you find alternative premises or do you need specialist ones in a specific area?

What would your customers do if you were unable to trade. Could you sub contract out or would you just lose them? How long would it take to rebuild your customer base?

What are the typical Indemnity Periods available?

As already mentioned, insurers offer a standard period of 12 months. We can investigate and price longer periods and often premiums are not proportionately higher so doubling your cover may not cost you double the price.

There are plenty of examples of where a business has not been able to get back to trading within the indemnity period because the Business Interruption Insurance Indemnity Period was inadequate so it’s vital that you are not underinsured.

If you would like chat about your Business Interruption insurance or your indemnity period why not give us a call on 01494 450450 and we’ll pop in to see you.