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What business insurance do you need against natural disasters?

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Last week’s St Jude storm has highlighted the importance of businesses having the right insurance to cope with unforeseen circumstances – indeed, insurers have paid out more than £130m since the storm. From energy service interruptions, to floods and other forms of storm damage, how can you best protect your business?

Andrew Jackson, director of retail brooking at One Insurance Solution, says that while most homeowners understand the importance of having buildings and contents insurance, it is just as important for SMEs to get the right cover too.

He offers five tips for SMEs to 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,” he explains. 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 an 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,” he says. “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 businesses 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,” says Jackson.

Calculating loss if the worst happens: Finally, it’s important that business owners be well versed in calculating loss. Jackson explains: “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.”

It can seem daunting to need all these different types of insurance, but they really vary by business – there won’t be many that require all of the above policies. But by getting insured, you can help to protect your business if the worst happens.

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