Our Trusted Partner, Towergate Insurance, have provided very useful information about insurance advice for businesses experiencing a major interruption to the running of their organisation. We hope you’ll find it useful. If you would like to contact Towergate Insurance for more advice, please see the end of the article below for their contact details.
How would your business cope with a major interruption?
Imagine something like a fire for instance, affecting your business’s ability to function. What would the financial implications be? It would almost certainly affect your ability to generate income and might also involve additional costs in order to operate at all – things like finding temporary premises or making overtime payments to employees.
While some things will always be outside your control, there are steps you can take to protect your business like making sure you have the right insurance in place and developing an effective Business Continuity Plan. A little thought now could save a lot trouble in future.
Business Interruption Insurance
The Business Interruption cover under your commercial insurance policy will be critical to your ability to get back on your feet and will usually have a ‘material damage proviso’. This means an event usually insured under the material damage section (such as flood or fire) must have occurred and caused damage before cover is activated.
Beyond that, the protection provided by different insurers can vary substantially so take time to understand the basis on which you’re covered, the adequacy of the indemnity period specified and the impact of any extensions or exclusions on your particular home care business.
- Basis of cover
If your business is only likely to be exposed to a loss of income you‘ll need Loss of Gross Revenue cover, also known as Loss of Gross Income, Loss of Turnover or Loss of Fees.
Business Interruption insurance that includes any increased costs in order to operate is called Increased Cost of Workings (ICOW). It covers you for the reasonable additional costs you incur to reduce the impact of a loss but only if it makes sense to. So, if your annual turnover is £50,000, an insurer is unlikely to pay £250,000 towards the cost of rent in a more expensive location and will instead look to secure similar premises from which to operate.
It is possible to buy protection for costs in excess of the economic limit under an Additional
Increased Costs of Workings (AICOW) section. This covers expenditure expected to benefit the business in getting up to the levels of income generated prior to the loss and could include open days or media coverage of your reopening.
- Indemnity Period
All Business Interruption options include an Indemnity Period, that is the timeframe for which
compensation is payable. Make sure it reflects how long it would take to reinstate your property after a major loss and how long you’d expect it to take to get the business back to pre-loss levels.
- Endorsements and Extensions
These either restrict or extend cover beyond standard limits. Extensions that can be particularly useful for home care businesses include:
Temporary Employees
– Covers the cost of wages paid to temporary employees hired solely to replace members of staff who have suspended pending a safeguarding investigation as a direct consequence of an accusation of abuse.
Infectious Disease
– Covers the loss of revenue if restrictions are imposed on the use of your premises by a local authority.
Supplier Extension
– Covers the additional costs you incur following physical damage to a supplier’s business.
Business Continuity Plan
A Business Continuity Plan is a set of specific instructions that outlines who should do what if events occur that disrupt the running of your business. Its objective is to get your business up and running again as quickly as possible.
A Case In Point
A Towergate Insurance client recently experienced a flood that caused their office to close.
However, because they had allocated a space for a Portakabin as part of their Business Continuity Plan, a spare one was delivered within 24 hours of the closure and the business suffered only minimal disruption.
Issues to consider when you’re putting together your Business Continuity Plan could include:
- Do your employees know what to do in the event of a major incident? What, if anything, should they say to the media?
- What would you do if you couldn’t access your computer system?
- What type of temporary premises would you need if yours was closed – either partially or completely?
- How would you keep in contact with your employees and service users?
- What arrangements have you made for the additional transportation you’re likely to need in extreme weather conditions?
If you already have a plan, review it regularly as it can quickly become out-of-date. Your insurance broker should be happy to review it and make appropriate suggestions.
Towergate Insurance has been providing specialist broking services to the caring sector for more than 30 years. We protect homecare businesses, employees and service users with specifically designed policies and are the preferred insurance partner of the HCPA.
For more information contact our home care specialists and quote ‘HCPA Member’ on 0330 123 5172 or go to www.towergateinsurance.co.uk.