Posted on: 09 April 2020 (updated on 21 April)
Why you shouldn’t cancel your insurance because of COVID-19
During the ongoing coronavirus outbreak, many businesses have been looking to their insurance policies to help them whilst they are forced to close. Whilst many businesses have purchased insurance to protect them should they be unable to trade, they have found that in most cases, their policy only provides protection for certain notifiable diseases or the disease must have occurred at the premises. Almost always and as announced by the Association of British Insurers (ABI) pandemics, including COVID-19 aren’t generally insured as standard. As a result, in the main, your business insurance policy will not cover the reduction in profit or loss of income if it has had to close for any other reason than an insured peril, including enforced closure by the government.
Whilst you may question the value of your current insurance policy and, more specifically, the Business Interruption section, it is important to remember that your insurance programme can cover you for more than just business interruption. It will ensure your risks are managed and assets are protected during the current climate so that you have a business to return to when the social distancing lockdown is lifted.
What does my business insurance cover?
Depending on the types of covers that you selected with your insurance broker, your policy can cover you for the following risks.
Business interruption cover
Many may feel let down by their Business Interruption (BI) cover, as this is the part of the policy that was believed may pay out due to businesses closing down in such circumstances. However, BI is still an incredibly important cover to protect your business in the event of a disaster.
BI insurance can still protect your business and provide income when your business cannot trade as a result of fires, floods and major thefts. For example, if you were to suffer from a flood whilst your business was closed and then the government allowed life to go back to normal, it is likely that your BI insurance would pay out for the loss of profit or income for the amount of time it took you to reopen your business as a result of the flood. If, however, you cancel your insurance policy, any financial burdens would be on you whilst your business recovers after a period of low income.
When your business is closed for a long period of time, this is a prime opportunity for thieves to break into unoccupied buildings putting your assets such as stock, equipment and specialist tools at risk from theft. Unfortunately, as people face financial hardships, it could be likely that someone may break into your premises to steal the items that they feel that they can easily sell.
If you have contents cover on your policy, your business may be protected against theft whilst your business premises are unoccupied. It is important to understand the security requirements applicable on your policy which will be detailed within your policy schedule and/or wording.
Similar to theft, if people know that your commercial building is unoccupied, this gives them the chance to cause damage to your property with no one around to report it.
Damage to property can be expensive to fix, so having a cover in place that protects your premises in the event of damage can help minimise a financial loss to you.
Don’t forget that if your premises are unoccupied for more than 30 days you usually have to tell your insurance company. During the current lockdown most Insurers are being pragmatic and extending this time limit but, to be on the safe side, tell your broker or insurance company that you are closed.
Employers’ liability insurance
Many employees in the UK have been placed on furloughed leave while some businesses have been able to accommodate their staff working from home.
If you have employees, you will still need employers’ liability insurance to protect you and your staff should they injure themselves whilst working, it’s a legal requirement
Public liability insurance
Some of your clients may want to ensure that you have Public Liability (PL) insurance cover when you work for them and include it in the terms of the contract. PL insurance is designed to cover your business against claims from members of the public or other businesses where your business activities have caused injury to them or damage to their property.
If you cancel your PL insurance whilst still in contract with your client, you may be in breach of the contract, which could lead to complications when you restart work again. Also, if you undertake work away from your premises, contract sites still have a risk exposure which may remain your responsibility.
Product liability cover
Product liability insurance is there to protect businesses from claims arising from a faulty product which causes injury or damage to third parties or their property. So if you cancel your insurance and a new claim is reported arising from a product that you have sold in the past, you will be liable to pay the claim, as your insurance no longer exists to cover you.
Insurers may be unlikely to pick up on previously supplied products if there has been a break in cover by the insured party.
Professional indemnity insurance
Similar to PL, Professional Indemnity (PI) insurance could be required as part of the contract with your client. It covers you against claims for professional negligence or inadequate advice that you may have given or actions that you have taken that have led to a financial loss for your client or customer.
PI insurance is written on a claims-made basis so if a claim comes in after you have cancelled the policy, there isn’t any insurance in place to protect you as the business owner. Typically, PI policies only cover activities which have taken place after a certain date, known as a retroactive date. If you cancel your insurance policy, it is at the discretion of your new insurer when you start trading again, as to whether or not they will cover your work from your previous retroactive date.
If your insurance picks up on the gap in cover from cancellation, they could add a premium onto your new policy when you start trading again.
Commercial vehicle cover
If you have a commercial vehicle but no work, you might be tempted to cancel your business insurance. However, if you rely on your commercial vehicle when you are outside of work, you will need to have insurance in place to be able to drive on the roads.
A minimum of third party insurance is a legal requirement for all road vehicles, so cancelling your commercial vehicle insurance could be disastrous for you and your business. Don’t forget, your van could get stolen too!
Commercial legal expenses
Many employment disputes can be covered under a commercial legal expenses policy, and at a time when your business could be on a reduced income or whilst closed, there may be an increase in employment or contract disputes. Many policies also provide access to a legal helpline or document template library which could be an invaluable tool.
Directors & Officers insurance
The insurance industry is expecting an increase in Directors and Officers (D&O) insurance claims as businesses may be facing claims arising from decisions that have been made that haven’t accounted for pandemics.
It is important to keep D&O insurance cover in place to ensure that all decisions you make for businesses continue to be covered.
Business travel insurance
If your employees need to travel regularly as part of their roles, your business may have taken out business travel insurance. The outbreak has meant that a number of business trips are likely to have been cancelled as governments around the world have implemented travel restrictions, limiting the places that people can go or leave.
You may need business travel insurance to reimburse any trips that are being cancelled, and if there any members of staff that are trapped where they have visited. It is important to not cancel your insurance until they have arrived home safely, as your travel insurance can repatriate you for many costs, including medical bills that may have been incurred because of COVID-19.
It is important to understand the guidance and advice being given by the Foreign & Commonwealth Office before travelling abroad. It is just as important to adhere to the advice being provided by the government in relation to travel within the UK too so as not to jeopardise your cover.
Personal accident cover
As with most personal accident insurance covers, it is important not to cancel this type of insurance for the simple fact that if you cancel, you will not be covered for a personal injury that you may experience at a later date.
Personal accident insurance can give you peace of mind that you and your business can be covered in the event that you suffer a life-changing accident.
Protecting your business with insurance
It’s important to make sure that you have the right insurance in place to protect the business that you have built.
Every business is different and has its own business insurance needs, which is why we work with some of the UK’s most well-known insurers to make sure that you are getting the right insurance cover for your business.
To help you and your business during these unprecedented circumstances, Premierline has taken steps to ensure that we can continue to offer our award-winning service.
All Premierline employees are now working from home, but our teams are well equipped to be able to answer your questions and help to support your business whilst the coronavirus pandemic continues. We have published answers to many frequently asked questions and our contact details on our customer information page.
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The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Insight Hub.