Research carried out by the UK’s leading insurance provider for small and medium businesses, Aviva, has revealed that many SMEs are taking a huge financial risk by not being covered for business interruption.
While buildings cover takes care of any repairs, business interruption insurance covers any loss of earnings during the periods when you are out of action due to unforeseen circumstances.
According to the bi-annual ‘Pulse’ study, 62%, equating to around 2,900,000 of firms, do not have this type of insurance, leaving them financially vulnerable.
Robert Ledger, Head of Small Business at Aviva, said: “We never want to think about the worst case scenario but when it comes to protecting your business, taking a few simple measures now could make a huge difference to your recovery.
“Ask yourself if you could afford to pay costs like wages from your own pocket until the business is back to being fully operational. If not, you should check you have business interruption insurance included in your policy.”
Do you have a business continuity plan?
While corporate risk is something taken very seriously by larger companies, smaller businesses can often be less vigilant.
Mr Ledger recommends that all SMEs should create a business continuity plan – essentially ensuring financial survival if a business was out of action for a few months due to flood or fire damage.
He added: “More and more businesses now want to see the business continuity plans of their suppliers to understand the impact of any event on their own service levels so having a business continuity plan can also be useful in your contract negotiations.”
Among the SMEs that were not adequately cover, 21% had faced periods where trading was disrupted. Of these, 42% admitted to having to borrow money from friends and family or take out bank loans to cover the loss of earnings.
To find out more about small business insurance packages, incorporating business interruption cover, get in touch with experts at The Insurance Octopus today.