As much as you might hope it never happens, or try to prevent it, occasionally circumstances outside your control may force you to close your business. Shutting shop for a few days while you redecorate is one thing but if you’ve fallen victim to bad weather or bad fortune, it might be harder than you think to reopen your doors.
Time – the hidden nail in the coffin for businesses in trouble
It’s an often repeated claim that 80% of businesses that are affected by a major incident close within 18 months and while the truth behind that statistic can be tricky to verify, it’s easy to see how such a thing could be true.
While incidents like minor break-ins or vandalism might be expensive but ultimately surmountable headaches, if your business were to suffer severe flooding, or fall victim to arson, things could be very different. The most obvious problem is the physical damage you would suffer. Your premises would have to be repaired and redecorated, potentially including things like fitting new carpets and windows, and stock or equipment might have to be reordered. All this can come at great expense but thankfully is typically covered by a commercial building and contents policy so if you have that in place, these costs will likely not prove too difficult for you to overcome.
What you may not have considered when insuring your business is the thing that is actually responsible for many of these closures – business interruption. The ensuing rebuild or refurbishment of your business can be time-consuming, and the real costs are often measured not in expense but in loss of income. If your property is flooded it could be weeks or even months until it is habitable again and even if the cost of your repairs is covered by your insurance, every day that you are not open is a day that you are essentially unemployed and further earnings lost for your business. On top of this, delayed closures can affect business relationships with suppliers and partners, drive customers elsewhere and more, all of which can impact upon your ability to reopen.
If The Unexpected Can Happen, It Will
Of course, we always hope that we’re not placed in such a position, but the point of insurance is that it protects again the unexpected. From December 2013 to February 2014, the UK suffered the most severe flooding on record, affecting thousands of homeowners and businesses. During this period, insurers received 3,100 flood claims from businesses amounting to payouts of an estimated £249 million. That’s a huge figure and it doesn’t even account for the 44,700 storm damage claims made by businesses, not to mention any other claims that may have been made as result of this weather. These widespread floods affected homes and businesses not typically at risk from flooding. If those 3,100 businesses had not been insured, how many would have been able to recover?
Likewise, it is estimated that as many as 10% of farms and rural businesses affected by the 2001 foot and mouth outbreak were forced to close their doors within 18 months. That’s a lot of businesses that closed due to something almost entirely outside of their control.
Business Interruption Insurance – A Vital Lifeline
Incidents like this are why business interruption cover is crucial when you insure your business. Business interruption covers the loss of earnings you would otherwise suffer while you repair, restock and rebuild following an incident and it’s this cover that proves absolutely vital in keeping many businesses afloat during difficult times.
Whatever your industry, discuss the right business interruption policy for you with a CSW advisor. Get in touch on 01461 337 751 or firstname.lastname@example.org.