By Andrew Jackson, director of retail broking at One Insurance Solution
According to statistics small to medium sized enterprises (SMEs) account for 99.9% of private sector businesses in the UK, with many being run from commercial premises. Last week’s St Jude storm highlighted the importance of businesses having the right insurance to cope with unforeseen circumstances including energy service interruptions, floods and other forms of storm damage. Andrew Jackson, Director of Retail Broking at One Insurance Solution, offers his top tips for businesses that are looking to brave the conditions.
Most homeowners understand the importance of having home and contents insurance, with protecting personal property and possessions often a primary concern and mortgage providers only keen to lend to those with adequate cover. It is equally important for SMEs to get insurance that looks after their interests with the right cover.
For most SMEs being unable to trade for an extended period of time or suffering damage to stock and equipment can have serious consequences. Here are a few tips to help you avoid disaster:
• Talk to an expert — It might seem obvious, but every year SMEs across the UK are left out of pocket through having inadequate cover. Specialist commercial insurance brokers will take time to understand exactly what you need to protect your livelihood. Often, they will be able to negotiate a good rate with some of the UK’s biggest insurers, so there’s nothing to lose.
• Business Interruption Insurance — This isn’t always offered as a standalone product, but is usually available with commercial premises or public liability insurance. In the event of a SME being unable to trade due to unforeseen circumstances including those caused by the St Jude storm, Business Interruption Insurance provides two options, either you will be found alternative premises or you will reimburse your loss of profit. It’s important to note that this type of cover is most suitable for medium to long term business shutdowns, with most policies taking 48-hours to activate.
• Stock and Contents Cover — This is particularly useful for small retail operations. Again, this type of cover can be added to premises insurance and protects damage to and theft of stock and equipment.
• Freezer and Fridge Cover — Hospitality, food and beverage rely on their ability to freeze and refrigerate perishable materials and ingredients. If a storm were to cause a power failure it could mean that thousands of pounds worth of stock can no longer be used. Setting up business insurance to cover any such eventuality means that there’s less need to be scared when the lights go out.
• Calculating loss if the worst happens — It’s important that business owners are well versed in calculating loss. There are two methods which can be used; top-down and bottom-up. Top-down takes lost sales and subtracts the expenses saved during the time of loss, whereas the bottom-up method works in reverse by taking the loss period’s net income and adding expenses through the loss period. Although the bottom-up method is more complex to calculate, it is much more accurate and therefore gives a realistic idea of the level of cover you can expect to gain.
Taking the time to get all the insurance that you need shouldn’t ever be too much trouble, it could be the best investment that an SME makes all year.