Most insurance wouldn’t pay pubs, restaurants or theatres even if the Government ordered them to close their doors, insurers say
- The Prime Minister has urged the public to stay away from pubs and theatres
- Trade body, the ABI, says that most firms policies do not include this insurance
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Most businesses would not be covered by their insurance even if the government did order them to close their doors, insurers clarified today.
Following the Prime Minister’s advice to the public yesterday to stay away from pubs, restaurants, clubs and theatres, concerns were raised that firms would not be able to claim on their business interruption insurance without a government order to close.
But today, the Association of British Insurers trade body released a statement saying that even if these businesses were ordered to close their doors, insurers were still unlikely to pay out.
It said most policies do not include this in business interruption cover and so a government order to shut would not have made a difference.
Most businesses will not be covered by their insurance if the government orders them to close
The ABI statement read: ‘Irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by coronavirus.
Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by the authorities
‘Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by the authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.
‘A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease.
‘In this instance an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check with their insurer or broker to see if they are covered.’
The statement comes as businesses anxiously await an announcement on help for those affected by coronavirus and the lockdown.
There is immense pressure on the Government to come up with some form of huge scheme to tide firms over until people are told that they no longer need to stay at home and practice social distancing.
This could potentially involve a state-backed business interruption insurance scheme, with all firms able to claim.
The insurance industry statement published by the ABI today on business interruption cover
In the recent Budget Chancellor Rishi Sunak announced a ‘coronavirus business interruption loans scheme‘, with banks to offer loans of up to £1.2million to small and medium-sized businesses.
Sunak said: ‘The government will offer a generous guarantee on those loans, covering up to 80 per cent of losses, with no fees, so that banks can lend with confidence.
‘This will unlock up to £1billion of attractive working capital loans to support small businesses, with more as needed.’
Some businesses have complained they are too big to benefit from the rates holiday, or £3,00 grants, while freelancers and the self-employed say they are having work cancelled without a safety net.