Aviva recently launched the UK’s first ever automatic 24 month business interruption indemnity period.
In this post we’ll explain the rationale behind this move, before discussing why we think a 24 month indemnity period should come as standard on all business interruption insurance policies.
If you’ve any questions or concerns about your business insurance needs, we have a team of experts on hand to assist. They can also help you to understand the risks that you may face as a business. Contact us on 020 8290 9080 or email business@anthonyjones.com.
What Should a Business Interruption Indemnity Policy Do?
A business interruption insurance policy can cover you for any loss of income your business may experience if you’re unable to trade due to an unexpected event, such as a fire or flood.
A good business interruption insurance policy will give you enough cover to restore your business to the position it was in before this event took place. This is why the maximum indemnity period is a vital part of any business interruption insurance policy.
What is the Purpose of the Maximum Interruption Indemnity Period?
The maximum indemnity period is an estimate of the amount of time it would take your business to fully recover from the event. Your business will stop receiving claim payments once you reach the end of the indemnity period, even if you have not yet received your maximum sum insured.
This means that businesses may be facing underinsurance without knowing it: Their business interruption insurance policies might not provide quite the level of cover they expect.
For more information, be sure to read our full guide to business interruption sum insured.
Why Aviva Introduced 24 Month Indemnity Periods as Standard
Aviva introduced an automatic 24 month business interruption cover uplift as standard in an attempt to combat underinsurance among SMEs. The move followed research that suggested that too many businesses severely underestimate just how long it would take them to recover from a major incident.
In 2024, 43% of SMEs hit by a fire or a flood need between 12 and 24 months to fully recover. Only 13% were able to recover fully within six months. Despite this, just 21% of SMEs had 24 months of business interruption insurance cover, while only 28% had 12 months of cover.
Will 24 Month Indemnity Periods Become The Standard?
Aviva may be the first insurers to offer a 24 month indemnity period as standard, but they probably won’t be the last. Underinsurance is a perennial problem for UK businesses of all sizes. Insurers should embrace any initiative that could help to combat underinsurance, and Aviva’s new policy will certainly make a difference.
On the other hand, businesses have a responsibility to ensure they have all the cover they need. In some cases, insurers may be held responsible for their clients’ underinsurance. But ultimately, the responsibility may lie with the policyholder.
So take the time to review your business interruption insurance policy. What’s your current indemnity limit? If it’s anything less than 24 months, then contact your insurer as soon as possible to ensure you’ll have all the cover you need should you ever make a claim on your policy.
We Can Help You Avoid Underinsurance
Mark Stevenson at Anthony Jones says:
“At Anthony Jones, we fully support Aviva’s move to offer 24 months business interruption indemnity periods as standard. Indeed, we think that 24 months should be the standard minimum indemnity period in all business interruption insurance policies.
“The fact is that it can take businesses a long time to recover from major incidents, and too many businesses seriously underestimate just how long their recover may take. The longer your indemnity period, the more time you’ll have to recover, and you won’t risk underinsurance should your indemnity period run out before your maximum sum insured.”
If you’ve any questions or concerns about your business insurance needs, we have a team of experts on hand to assist. They can also help you to understand the risks that you may face as a business. Contact us on 020 8290 9080 or email business@anthonyjones.com.
