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Business interruption insurance for rural businesses

December 17, 2013

Business interruption insurance is universally regarded as complicated, but for rural businesses the reliance on weather, crops and livestock make it even more complex. Patricia Jones, Head of CLA Insurance, explains how business interruption insurance benefits rural businesses and why a broker is essential for getting it right.

How is Business Interruption different to standard insurance?

It is an incredibly complicated area of insurance (and even more so in the rural environment), which involves modelling how your business would perform over the next 12-24 months, calculating the projected income and making sure the cover fits into your business plan.

Standard insurance provides cover for damage to property and machinery, but it doesn’t cover the losses in income your business may suffer as a result of that damage. While the property damage is often expensive, the loss of income in the following months or even years can total a lot more.

This is where Business Interruption insurance can help. It is designed to maintain the turnover of a business during its indemnity period so it can eventually resume trading at a pre-loss level.  It is an important tool for securing the financial future of your business.

How much coverage do I buy?

Your broker will work with you to calculate how much coverage you can buy, as it varies depending on your business’s activities. Roughly speaking though, a farm should insure its produce on a gross income basis, so for example a dairy farm would insure to the value of the milk it would produce or an orchard to the value of the fruit, and any commercial activities, like farm shops or campsites, should be insured to include their gross profit.

How business interruption has helped CLA Insurance clients

These examples show some of the many different ways business interruption insurance helped our clients’ businesses continue operating after a loss.

Example One: Re-homing cattle

A cattle shed, which housed our client’s herd of cows over winter, was damaged in a storm. Until the repairs were carried out, it was unsafe for the cattle so they had to be moved and alternative arrangements made.

Property insurance covered the cost of shed repairs.

Business interruption insurance covered the costs of moving the cattle, their food and bedding and for using an alternative shed to house them.

 Example Two: Keeping the barley harvest going

Our client’s combine harvester caught fire due to an electrical fault, resulting in a total loss of the machinery as well as personal items and harvested barley.  He needed to continue with the harvest as soon as possible, but didn’t have a replacement combine.

Fleet insurance covered the replacement cost of the combine harvester and its contents.

Business interruption covered the cost of sourcing and hiring a combine harvester, while the original one was replaced, so the harvest could continue.

Example Three: Reducing fox worry

A fox was worrying our client’s flocks of free-range laying hens, which led to a decrease in egg production.

Business interruption insurance covered the loss of revenue that resulted in decreased or no egg production.

For more information on Business Interruption for rural businesses, or any other aspect of your insurance, please contact CLA Insurance on 01234 311211 or insurance@cla.org.uk

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