During the current pandemic lockdown, business owners need to be aware of the limitations and conditions on their commercial insurance policies and how cover might be affected.

If the business owner is coming up to the renewal date and is deciding whether or not to renew those covers, there will also be factors which are important to consider, especially at this time more than ever before.

Just because you are not trading at the moment, does not mean that all of your liabilities for activities, past and present disappear, far from it in fact; the majority still exist and the pandemic situation might actually increase the possibility of people making claims against you now, especially if they are out of work and short of money.

If cost is an important consideration, then there are very real ways in which you can make sure that the premium is lower than it was last year. None of this is rocket science and these are perfectly reasonable steps to take, given where we find ourselves under CV19.

Why is Insurance Important?

As a business owner, the future of your business and therefore your personal livelihood, fortune and your family’s lifestyle can be put in serious jeopardy if claims arise and there is no insurance policy to respond to them. Likewise making sure that your cover is effective is essential, whilst controlling cost at this time is more important than ever, especially if the opportunities to earn are limited or non-existent.

10 Tips for Immediate Consideration

This is not an exhaustive list and not specific to any situation or business, so some but not all of them may apply. If you have a professional adviser discuss them with him/her first and if you haven’t then pick up the phone and get advice. The first conversation is normally free, and a good adviser won’t mind demonstrating value, where a potential sale may follow.

#1 Unoccupancy – All policies contain conditions relating to unoccupancy. It normally means you lose Theft, Malicious Damage (Vandalism) and Escape of Water cover, after a certain number of days – normally 30. Check what it says then ask if the period is being extended in the current CV19 situation. Take reasonable additional precautions after these conditions apply.

#2 Security Systems – Whilst your property may be unoccupied for an extended period of time, it may become an even more attractive opportunity for thieves, especially if your stock and equipment is valuable and theft attractive. Make sure your security systems are operative and test them all regularly. If you use a central station and CCTV, test those as well.

#3 Regular Inspections – Most insurances will insist that you make regular inspections of your premises for several very good reasons. First you reduce the appearance of unoccupancy and also reduce the opportunity for thieves to take advantage of the situation. Secondly you will be able to identify and address any problems, alarm faults, burst pipes, signs of attempted entry or ingress of water etc..

#4 Public & Product Liability – Claims are dealt with on a “claims made” basis. That means that the policy in force at the time when the legal claim arrives, deals with the claim and not the policy which was in force at the time of the sale or action leading to the claim, even if that was several years ago. If there is no policy in force, then there is no policy to respond to the claim and it will fall on you personally.

#5 Professional Indemnity – The same also applies for professional advice given or services delivered. In this situation it applies to the “Retrospective Date” which is usually the date you started your business and covers any claims arising since then. There are no days of grace here, so if you don’t renew it, you don’t have cover and any claims will again fall on you personally.

#6 Sum Insured – If you operate business premises with substantial amounts of stock or raw materials then you should consider the sum insured whether you are in the middle of the policy year or approaching renewal. Either way if your stock levels are down and not being replenished, reducing the sums insured will either get you an immediate return of premium to renewal date or a reduced renewal premium. It can just as easily be increased later if necessary.

#7 Turnover – Turnover is used as a measure of exposure to risk and is therefore used to calculate the Public, Products or Professional Indemnity premium. If you are coming up to renewal at this time it would not be unreasonable to declare a turnover figure for the next 12 months, 25% lower than last year, because that is the likely effect. This will reduce the liability part of the premium where turnover is a factor.

#8 Wages – Wages are used to calculate the Employers Liability premium. More wages, more staff, more exposure. If you are coming up to renewal it would not be unreasonable as above to declare 25% less than last year. This will reduce the Employers liability part of the premium. If the insurers say total wages have to be declared, even if staff are furloughed, because they are still on payroll, ask that the premium reflects the fact that they can NOT work and are therefore not at risk of injury in the workplace.

#9 Gross Profit – Again Gross Profit or Gross Revenue are typically used to calculate the Business Interruption premium. Declaring a lower gross profit for the forthcoming 12-month period, which will actually happen unless you have some massive contract to kick off in the second part of the year, will reduce the premium relating to this section of the policy.

#10 Renewal – And finally…If your insurance is coming up for renewal, do not let it lapse. If you renew it whilst its unoccupied, insurers consider it a continuous period and most of the cover will still apply, even after the unoccupancy period has been reached. However, if you let it lapse and try to start a new policy you will fail to get cover. Insurers do not issue new policies on vacant properties or business premises.

In Conclusion

So there you have it, my 10 top tips for responding to the current CV19 situation and how to structure things around the major sections of any policy, Material Damage, Liabilities and Business Interruption, whilst at the same time maximising the opportunity to reduce premiums, when you could really do with the money in your pocket, not that of the insurers.

Stay safe and stay healthy 😊

Nigel Adams

About the author

I was once called an “Insurance Freak” by another broker. When I asked him why, he said, “We just do this for a living, but you really love it, everyone knows that!” I have to plead guilty to that one, but with no shame whatsoever. If you’re not passionate about what you do, then do something else!

At Severn Bay we believe in a fee based approach to business. No commission to cause conflicts of interest. This aligns our interests directly with yours, enabling us to build a relationship of trust and mutual respect. All we care about is the correct technical solution, at the lowest price in the market. Always there when you need us – 24/7/365. Concerned phone calls generally end with a sigh of relief and peace of mind and if we can save you money as well, it just makes us twice as happy.

So if you want to know why our clients come back year after year, some for over 40 years, just give me a call in the office 029 20 470 375 or on my mobile 07714 123 989. We can meet for a virtual coffee and I will happily tell you why they do (I won’t keep you too long, I promise!)

➡️ Email:  nigel@severnbay.com

➡️ Website: www.severnbay.com

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