Business Interruption Insurance – Motor Trade
So you have made a claim and your insurance company have agreed to pay, but not for all of it… Why?
The reason they say, is that you are under insured; Business Interruption under-insurance for motor traders works no differently to being under-insured for property.
Lets understand what can go wrong before we explain how to get it right and what it is
When you took your insurance out you were asked for a Gross Profit sum insured, you gave an answer that you thought was the correct amount but that doesn’t matter does it because whatever you said it was, you will get that amount in full in any case.
Err, well no actually … you might think that’s how it works and you are certainly not on your own. Remember someone mentioning “average clause” to you when you was having your rant about not getting your full amount, and no average isn’t something that’s sort of “in the middle” when it comes to insurance.
Sitting comfy … here we go.
As far as you are concerned as a motor trader when being asked for Gross Profit, this is the bit after the cost of your consumable items have been taken away from the turnover of the business.
So, your turnover is everything received incoming from the work that you have done for your customers, your consumables are all the parts, the oils, the lubrication and the like that you have used in the course of repairing their vehicle for them, what you have left over is the bit we are interested in which is the “Gross Profit”.
What Gross Profit isn’t.
Accountants tend to make simple things difficult, they calculate things differently to how the insurance industry requires it, so it can be a bit confusing.
If you have purchased a capital item in the business, say a new lift, this would not be a consumable item and therefore ignored.
Gross profit as an indicator is the amount before any deductions such as wages and overheads have been deducted, if you you have your business accounts handy the amount you are looking for is at the top of the page and certainly not at the bottom – that’s going to be NET Profit, insuring on this basis could spell disaster in the event of a claim.
Understanding Gross Profit and Business Interruption can be a challenge, getting it right though is essential and that’s where the services of a specialist motor trade insurance broker such as Real Automotive is going to come in.
Business Interruption – another essential bit to understand
There is something called “Indemnity Period” with business interruption insurance, this is also an essential area to understand, we have explained this further under our section on indemnity period.
Looking for Business Interruption Insurance
Let us look at your requirements for this type of cover, being specialist insurance brokers we have instant access to all the motor trade insurance markets, we provide fast and competitive quotes tailored to what you need.
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