Here Gemma Rawlinson of H&H Insurance Brokers explains why business interruption insurance (BI) is such an important aspect of rural farming, and why it is essential to get the right coverage.

“This type of insurance is designed to help you maintain the income of the business during a specified period of time, so that getting the business back to normal is easier.” says Gemma.

The areas that the BI cover include:

  • profits that would have been earned
  • fixed costs, such as operating expenses still being incurred by the business
  • temporary re-location to cover the extra expenses for moving and operating from somewhere else
  • commissioning and training for the operators of the machinery replaced
  • reasonable expenses (beyond the fixed costs) that allow the business to continue operation
  • and forced business closures because of government legislation.

H&H has found that many farmers either don’t have the right cover, or assume that their insurance will cover all losses; this is not necessarily always the case.  It is important to check that you know exactly what your insurance covers, as well as making sure there are no vital gaps.  Should something happen that prevents your business from operating normally, such as severe weather, or property damage, BI could cover the impact this may have.

In these situations it is easy to underestimate the length of time your business will be affected, therefore it is important to ensure you have insurance that leaves you fully covered. One of the most common mistakes is to underestimate the time it will take to get the business running at full capacity again. After a major catastrophe such as a fire or flood, 12 months is often not adequate and a 24, or ideally 36 months indemnity period should be considered.

H&H Insurance Brokers regularly speak with prospective clients who have been unable to claim for a loss of income in the past. They point out that businesses need to be more aware of the gaps in the cover they have in place, specifically in respect of the term that their insurer will cover them for.  Many clients have been found to have either no business interruption cover, restrictive perils that can be claimed for, or very Iimited cover in respect of the terms of pay out.

Gemma adds: “These inadequacies sometime do not emerge unless there is a major accident, and you do not find out how well insured you are until you make a claim.  We would encourage all businesses to be well informed about the cover they have in place.  For example, do you know how long your insurer would cover a loss of income for in respect of a claim? We are finding that increasingly more and more people we work with are not aware of the specifics of their cover.”

To overcome this H&H Insurance offer a free, no obligation review of all insurance policies that clients have in place to ensure that rural farmers and rural businesses are aware of the cover they are paying for.