COVID-19 and Business Insurance: A Guide for Small Business Owners

Business insurance has traditionally not been a hot topic of conversation.  Even amongst insurance professionals, the only time it tends to come up is when giving clients the benefit of advice in terms of what they need and how they can save on their cover.

Since the outbreak of the Coronavirus, however, it seems to have taken over from Brexit as company owners’ and entrepreneurs’ greatest cause for concern.  Why? Because people are desperate to know whether they will be covered for business interruption (BI) if they are forced to close or lose income as a result of the crisis.

Here we’ve asked John Palmer, Managing Director of business insurance site Coversure to help us clarify the situation regarding whether your BI will pay out in the current crisis, whether you should consider pandemic cover as part of your insurance in future, and give you some insider’s tips on saving on business insurance quotes. Here’s what he had to say.

Business Interruption Cover and the Coronavirus: Will It Pay Out?

This has become my most frequently asked question - and one that most people don’t like the answer to, I’m afraid.  While there have been some contradictory statements on this from the government and insurers, and while discussions are ongoing, at the time of writing the short answer to this question is probably not, no.  It is likely that your policy will not provide business interruption cover as pandemic cover is only an option on most policies and even if it is in place, Coronavirus isn’t named and therefore you won’t be covered.

This has caused understandable consternation and I have raised the issue with various insurers myself.  They are quick to point out that pandemic cover is an option and that if they were to try and cover off every eventuality in a policy wording then not only would it become unbelievably complex; it would also make cover prohibitively expensive.

The reasons that most small and medium sized enterprises (SMEs) don’t include pandemic cover options is the unlikelihood of such an event happening – no one saw Coronavirus coming – and the cost of including it.  Insuring against the effects of something with such potentially catastrophic consequences isn’t something an underwriter would do lightly, and having to face prolonged periods of business interruption payments is a risk many would baulk at.

As I say, discussions are ongoing and the situation may change.  Certainly, if there’s one thing we have seen from the government and large financial institutions over the past few weeks, it’s a willingness to put their money where their mouths are and offer businesses support.

Will Pandemic Cover Become a Business Insurance Essential?

I’ve already had conversations with clients regarding adding pandemic cover to their business insurance.  Given there are already plenty of reports in the news that outbreaks like this are likely to become more common thanks to globalisation and the effects of climate change, it’s got people worried.  At the moment it’s the must-have cover that everybody wishes they had, that everybody thinks they need, but which few can realistically afford. Will this change? That largely depends on the insurers.  As with any new policy – electric car cover, for example – it starts out as being relatively expensive only to fall as demand rises and competition becomes keener. Time will tell, but I’d suggest that some form of more affordable cover will be made available soon.  As to whether it remains widely available and taken up is another matter. People’s memories are short and when it comes to renewal their desire to cut costs may trump their fears around protecting themselves against another unlikely event.

Related: Electric Company Cars Will Be Exempt From Tax In 2020/21

How To Save On Your Business Insurance

Here are a few tricks of the trade when it comes to reducing business insurance quotes.

• Increase your business’s security – Increasing your security can allow you to get a lower insurance quote.  Security measures such as web-based surveillance is cheap, easy to install and will play well with insurers

• Gain accurate valuations –Particularly when it comes to any stock, business contents and buildings cover. If your business valuation comes up below where your cover levels are then you can reduce your limits and pay a lower premium.  If, however, your valuation is higher than your current cover, then you can up your levels and save money in the event of a claim by having adequate protection in place.  If you don’t have sufficient protection then you’ll fall into the underinsurance trap. Underinsurance is no joke and is thought to affect thousands of UK businesses, businesses that could be in for a nasty shock should they need to make a claim

• Speak to an independent insurance broker – Talking to an independent insurance broker can save you both money and time.  Independent brokers have a panel of insurers they can consult and they can search the market to find a policy that meets your needs for a competitive premium

• Raise your excess – Increasing the amount you pay in the event of a claim can be a great way to reduce your premiums.  If you have a good (that is low) claims record then an increase in your excess is a good way to go

• Consider getting a bespoke business insurance policy – By combining several elements of cover in one policy, you can save time – something most business owners lack – and money.  A policy such as commercial combined is great for this

• Pay annually – Cash may be tight at this time of crisis, but by paying annually rather than monthly you’ll save money in the long-run

John Palmer is the Managing Director of Coversure Poole and Coversure Weymouth.  He has over 20 years of commercial and motor insurance experience and his team were named as ‘Broker of the Year’ at the 2016 and 2019 National Broker Awards.

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