Business Intteruption Insurance Advice

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Richard Picton

Richard Picton

Please see the below to help you work out what your business interruption calculation should be to make it as accurate as possible. If you want any advice please don’t hesitate to contact me.

·        Gross Profit is usually defined as turnover, closing stock and working expenses less purchases, opening stock, work in progress, and specified uninsured working expenses. Purchases are in this context of raw materials and consumables directly variable with turnover.

·        Gross Revenue is defined as the money paid or payable to you in respect of work done and services rendered. ·        Turnover is defined as the money paid or payable to you for goods sold and delivered and for services performed from your premises excluding VAT, interest earnings, and commission.

·        Certain working expenses (specified or uninsured working expenses) are deducted from your turnover. Examples usually include purchases of raw materials, carriage, packing, freight charges, and bad debts. As these specified working expenses (costs that are directly variable to turnover) are excluded from cover, great care should be taken in determining which of them to exclude.

·        Wage roll should not be deducted as a specified working expense in view of the possible need to retain key employees during any period of interruption and the legal requirements relating to redundancy payments. The premium rating makes allowance for the fact these charges could vary with turnover.

·        Please consider carefully how long it will take the business to fully recover to pre-loss turnover and gross profit/revenue levels should a major loss occur as this should determine the length of the indemnity period

·        The Indemnity Period commences with the occurrence of the damage and ends not later than the expiry of the maximum indemnity period specified during which the results of the business are affected as a consequence of damage. For most businesses, 12 months is insufficient for a business to fully recover

·        The Annual Gross Profit/Revenue value should be multiplied in accordance with the required Indemnity Period. (12 months=x1, 18= x 1.5, 24 =x 2, 36= x3 etc).