Securing Your Business: A Guide to Business Interruption Insurance for Alarm Installers

By Mark Gilbert

September 11, 2024

In the alarm installation industry, where businesses rely heavily on their ability to provide timely and reliable services, even a minor disruption can have severe financial consequences.

Where your trading premises have suffered damage, destruction or loss following fire, flood, storm etc., unexpected events can bring operations to a standstill, leaving companies vulnerable to significant losses. This is where business interruption insurance comes into play, offering a crucial safeguard for alarm installers to protect their livelihood and ensure business continuity. This type of insurance could be the only way your business can continue to trade while you are recovering from a loss. Business interruption insurance aims to put your business back in the same trading position it was in before the event occurred.

What is Business Interruption Insurance?

Business interruption insurance is a type of insurance cover that helps businesses recover from events that disrupt their operations and cause financial losses. It provides a safety net by covering the loss of income, fixed expenses, and other costs incurred during the period when the business is unable to function at full capacity.

Common Risks for Alarm Installers

Alarm installation businesses face a variety of potential risks that could lead to business interruptions. From fires, floods or storms to theft or vandalism, these events can bring operations to a halt and result in significant financial losses. Even something as simple as a power outage or equipment failure could prevent alarm installers from providing their services, impacting their revenue and reputation. Some policies will also cover business interruption because of customers not being able to get to your business premises or damage at the premises of a supplier or customer.

How Business Interruption Insurance Works

A comprehensive business interruption insurance policy typically includes several key components designed to help businesses recover from disruptions:

Gross Profit

At its most basic level, this cover will provide cover for any loss of gross profit due to your business being unable to trade due to an insured loss.

The sum insured for this cover is based on your company’s estimated gross profit for the next year.

It is important to note that an accountant’s gross profit is different from insurance gross profit and using the accountant’s gross profit can lead to the application of Average (reducing any claim settlement in proportion to the underinsurance).

Your gross profit amount should include your full wage roll as you are likely to still be legally liable to pay the wages of your employees even if your business cannot trade.

Increased Cost of Working

This cover might be more suitable if your business can, theoretically, trade from anywhere. Increased Cost of Working cover will provide a pot of funds to pay any costs associated with getting your business back up and running, such as finding new premises, sourcing new equipment, or obtaining new stock.

Increased Cost of Working cover has an economic limit. This means that insurers will not release the funds unless you can demonstrate that by paying out this money your business will either save money or make money.

There is also a cover called Additional Increased Cost of Working which does not carry this condition.

Real-Life Examples

Consider the case of an alarm installation company in the Midlands that was severely impacted by a major flood. The company’s office, store, and equipment were damaged, and they were unable to operate for several weeks. Thanks to their business interruption insurance policy, they received compensation for lost income, as well as coverage for the additional expenses incurred to relocate temporarily and replace damaged equipment. This financial support allowed them to maintain their operations and avoid severe financial strain.

How Much Cover Do I Need?

When it comes to choosing the appropriate level of business interruption insurance coverage, there are several factors to consider. Alarm installers should carefully assess their potential losses by evaluating their revenue streams, fixed expenses, and the costs associated with resuming operations after a disruption. It’s also crucial to consider the length of time it might take to recover from a potential interruption and ensure that the coverage period is sufficient.

How Can I Reduce the Risk of a Loss?

While business interruption insurance provides a crucial safety net, it’s equally important for alarm installers to implement effective risk management strategies to reduce their exposure to potential disruptions. This can include measures such as regular equipment maintenance, robust cybersecurity protocols, emergency preparedness plans, and contingency planning for alternative work locations or temporary staffing solutions.

What Next?

In the service-oriented alarm installation industry, business interruption insurance is a crucial investment for protecting your livelihood and ensuring business continuity. By understanding the key components of this coverage and working closely with insurance professionals, alarm installers can tailor their policies to meet their specific needs and mitigate the financial impact of unexpected disruptions.

At Alarminsure, we specialise in providing customised insurance solutions for businesses in the alarm installation and security sectors. Our team of experts can guide you through the process of assessing your risks, determining the appropriate level of coverage, and securing a comprehensive business interruption insurance policy that gives you the peace of mind to focus on growing your business.