Gross Profit for business interruption

Gross Profit for insurance purposes

Gross Profit is an essential item to get right if you have Business Interruption Insurance.

Firstly lets clear one thing up.

Gross Profit is NOT the bit that you are left over with at the end of the year when tax and everything else has been paid. That is NET PROFIT. For many people this still remains a confusing area and one that could cause you considerable problems if you get it wrong.

Its essential you get it right

Without getting overly technical and in simple terms, Gross Profit is the difference between your Turnover (Cost of Sales) and your Purchases. If a fire at your business premises forces you to close for instance, Business Interruption Insurance will cover your lost profits and/or earnings until you’re able to reopen your business.

But could I just have business interruption insurance for the additional costs only

You could have increased cost of working insurance instead, but really only in certain circumstances – if you have premises then a Gross Profit basis is better. Increased Cost of Working (ICOW) is fine if for instance you have a sales pitch with a portacabin. In the event of a loss there would be additional costs, rather than a long period where you couldn’t trade. For motor trade insurance for the Service and Repair sector Gross Profit basis of cover is generally the standard.

A quick explanation – Your sales pitch would still be there and you could still theoretically trade. Additionally there would be be little point paying premium for full GP basis when you could still trade from the premises, or should we say the sales pitch. It may not be your cosy portacabin you once had (remember that went up in smoke) but as long as you adequately insured said portacabin then a shinny new one should be on its way to you. Your sales pitch should remain undamaged and therefore cars can remain on it. There is no hard and fast rule to this – everyone’s circumstances are different and we would discuss your exact requirements when we discuss your quote.

Times are hard – Removing Business Interruption Insurance is NOT an option!

Removing Business Interruption Insurance from your motor trade insurance policy would be a particularly dangerous thing to do, we wouldn’t recommend this even as the last resort of saving premium. our advice DO NOT EVEN CONSIDER THIS. Times may be hard, they would be even harder if you had no premises to work from due to a fire and even harder when there is no income!

Business Interruption insurance still not making sense?

Let us look at your requirements for this type of cover, being specialist brokers to the sector we have instant access to all the motor trade insurance markets, we provide fast and competitive quotes tailored to your needs.

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