Care Home Insurance and the Business Interruption Insurance Indemnity Period

Business Interruption Insurance can be what stands between the collapse or survival of your care business following major loss such as a fire, flood or storm. As important as getting the sum insured right is ensuring that you have the right indemnity period for your business.

This article will help you understand the factors which influence how long a Business Interruption Insurance indemnity period your care home needs.

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The Business Interruption Insurance Indemnity Period is the period during which the business’ results are affected due to the loss or damage, beginning with the date of the loss or damage and ending not later than the Maximum Indemnity Period.

The Maximum Indemnity Period is stated within your Policy Schedule. Common Maximum Indemnity Periods are 12 months, 18 months, 24 months and 36 months. When deciding upon the length of the period you need to work out how long it would take your business to recover back to today’s trading levels following a Fire, Theft or Flood. Factors that you need to consider include:

  • Where would your service users go in the event of a fire or flood at your care home. How long would they have to move out?
  • If your buildings were completely destroyed how long would it take to get them rebuilt and the business trading again? You must bear in mind the length of time it would take to get the site cleared, architects appointed, plans drawn up, planning permission agreed (if you are in a Listed Building this could take a long time), contractors appointed before the works could even start…
  • How long would your funding last if you were not able to accommodate and care for your service users? How long would it take for you to secure new service users once the rebuilding work has been completed?

Sadly there have been plenty of examples where businesses have not been able to recover from a large loss due to the inadequacy of their Business Interruption Indemnity Period and cases where the rebuilding works have not been completed before the period has expired are not unknown. Business Interruption Insurance can be a complex area. You need to get the cover basis, the sum insured and the maximum indemnity period correct to help your care business to survive a major loss. I hope you have found this article useful and it will help you when considering the length of the business interruption insurance maximum indemnity period most suited to your business.

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