The life blood of a successful business is a healthy cash flow. Products are produced and sold, or services provided; wages and other overheads and expenses paid; profits made. Impede or stop the process, even temporarily and like a plant denied water, or a heart of blood circulation, the business suffers. If the interruption is severe enough it may never recover if there is not sufficient capital to call on during the lack of cash flow.

Business interruption insurance is not a guarantee of prevention and cure of all the calamities that can beset a business, but it is the means of ensuring that the policyholder will have the security of available money to pay ongoing business expenses, retain trained, experienced key employees, recover any additional expenditure on loss mitigation and to receive payment of the net profit which the business would have earned had the interruption not happened. Basically, the Business interruption insurance policy is a true example (or should be) of an Indemnity policy.

Therefore, if insurance is not arranged on the basis of insuring ongoing expenses which are those that cannot be avoided (i.e. 'fixed' costs) as they have to be paid whether the business operates at 10% or 100% capacity, plus the future trading net profit the business would have earned during the interruption, then there will not be an appropriate indemnity. If the policy is not properly arranged to suit the needs of the business, it will prove to be inadequate and will not meet the expectation of the insured when it is required to deliver the product purchased.

It's best to have an expert assist you to put together your Business interruption insurance which will give a business the best chance of survival when an insurable major loss occurs.

Your insurance broker can assist with advice, checking and calculating sums insured.