Business interruption – what is it and should you be worried?

When arranging an insurance policy for a salon most business owners will think of insuring the items within the salon. For example, how much it would cost to replace an item if it was stolen or damaged and how much it would cost to redecorate and reinstate the premises following a fire or a flood? What can sometimes be overlooked is that it can take time to replace or repair a premises or equipment after a significant event like a fire or flood. Time that you would have been trading and earning money is now time spent having to turn business away and not knowing if the customer will return when the repairs are completed. Imagine the following – you had a fire in the salon and the building was deemed unsafe. The only option for the insurer would be to knock the salon down and rebuild it which could take months. Could you afford to shut your business down for a year? You may not be trading from the premises but the bills won’t stop – instalments on leased machines, rent, rates and staff salaries all still need to be paid out with no revenue coming in. Even smaller claims like water damage to a treatment room can have a considerable impact on your business. The repairs may be completed within a few weeks but customer loyalty cannot be relied upon and your clients may look elsewhere for their treatments while you are closed and choose not to come back. Business Interruption insurance policies cover the insured's net profit and fixed expenses (which are often called 'standing charges'). Unlike buildings insurance, which only covers physical damage, business interruption exists to cover the income a business would have received had the incident not happened. Business interruption insurance can also cover the increased cost of working following an insured event happening. This can be: • Overtime for staff for clean ups to keep things running • rental costs for alternative premises where you can trade from whilst yours is being repaired • Hiring additional staff to keep the business running • Additional advertising to let your customers know where you’ve moved to and hopefully keep their custom Don’t forget the indemnity period. This is one of the most important aspects of the policy. It is easy to be tempted to get a 12 month indemnity period for a cheaper price but most rebuilds can take in excess of 10 months to complete and you don’t want your cover to run out before you’re trading again! When choosing an indemnity period, it is important to consider the maximum amount of time it would realistically take for your business to be able to trade again independently, taking into account factors such as how long it would take to rebuild damaged buildings, and replace lost stock and equipment. Therefore, it is arguably best to have an over generous indemnity period, rather than one that may not be long enough. HJ Direct often see Business Interruption claim settlements that far exceed the value of a material damage claim and this cover has often been a lifeline to customers. They are proud to offer £450k of business interruption cover with a 24 month indemnity period as standard on our salon policies. Why not call today for a quote? HJ Direct offers insurance for salon owners, self-employed hairdressers and students. For more information go to hjdirect.co.uk.