Insurance to Protect Your Business

3. Insure for Common Risks

Many threats are common to all businesses, including fire, theft and equipment failure. Consider each element individually to ensure your business is adequately protected.

3.1 Most businesses buy an all-risks policy that protects buildings and contents against a range of risks, such as fire, flood and theft in one policy.

  • If you own your premises, insure them for the full costs of rebuilding. This includes professional fees and site-clearance costs.
  • If you lease or license your premises, check what insurance cover your landlord has and check the wording of the lease.
  • Theft clauses cover stock and equipment when there has been forcible or violent entry to, or exit from, a property.
  • Insure your stock at cost price. If stock volumes vary, use your highest value.
  • Insure any stock or equipment you keep on your premises, even if you do not own it.

3.2 Equipment failure can cause serious problems.

  • Specialist computer policies protect you against the costs of breakdown and loss of information, but they will not cover the cost of upgrading to newer equipment.
  • Engineering policies cover most machinery against breakdown. Comprehensive engineering policies will often include inspection and certification of your equipment as necessary, organised by the insurer.
  • Equipment can be insured for the item’s value less a deduction for appropriate wear-and-tear, or on a ‘replacement as new’ basis. Check with your provider which cover your intended policy offers.

3.3 Money (including cash, cheques, stamps and other negotiable documents) is usually covered by a single all-risks policy.

  • Different cover limits will apply to money on the premises, in safes and in transit. Level of cover also varies according to the nature of your business and opening hours.
  • Your policy may also require you to vary banking times and routes or take other precautions.

3.4 Goods in transit cover protects the value of goods lost or damaged while in your vehicle or when sent by carrier.

  • The sum insured is usually limited to a fixed amount for each vehicle or each consignment.
  • Marine cover may be needed if goods are going to or from overseas locations.

3.5 Business interruption insurance offers cover for any consequential losses suffered following the original loss (eg after a fire).

  • Many business insurance packages combine cover for loss of profits.
  • The amount of business interruption cover should be adequate to protect the gross profit as defined by the terms of your policy, including any growth forecast during the maximum indemnity period.
  • Cover should include fixed costs, such as rent, as well as the extra costs of getting your business up and running again.
  • Make sure the cover lasts long enough. Many businesses will need more than the standard 12 months to make good the damage. Don’t underestimate how long it will take you to fully recover, including regaining lost customers.
  • Make sure your policy covers all locations and consider extensions to cover you for disruption arising from insured losses at suppliers’ or customers’ premises.

3.6 Staff honesty policies – sometimes called fidelity policies – cover against theft and other forms of dishonesty by employees.

BHP Infosolutions

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