Q: What does the policy condition average mean?

A: Assume you insure your contents for, say, £50,000. If you have a small fire,   causing £25,000 of damage you would expect to be fully covered. However, if on inspection, it is shown that you should have insured for £100,000 then you are only insured for half the contents. Therefore you will only receive half the claim, £12,500.

Q: What period should I insure for business interruption?

A: This is impossible to answer; each business will have its own needs. Traditionally 12 months has been the starting point. Due to various factors, not least local planning rules and the availability of professionals such as architects, a more prudent starting point would be 18 months. Thereafter it will depend upon various factors, lead time for replacement equipment, availability of alternative premises and the type of business. Pharmaceuticals may require 5 years cover for R&D that gets destroyed.

Q: I need to protect my income against ill health. PHI or Critical Illness?

A: Permanent Health Insurance provides an income in the event of long term inability to work. It provides a maximum of 75% of your normal income. You can be covered for as long as you are incapacitated, until retirement age if necessary.
Critical Illness pays out a lump sum on the diagnosis of particular conditions such as heart attack, stroke, cancer etc.  Which is best will depend upon your circumstances and what you want to achieve.

PHI provides the most comprehensive cover and in most cases should be in place first. However, if you would like the security of having your mortgage cleared for example, then critical illness with a smaller PHI cover maybe appropriate.

Q: I am a relatively new business and would like to provide some benefit for my staff but cash is at a premium. What can I do?

A: Death in Service cover is relatively cheap and is arguably the first protection you should provide. Much will depend upon the size and age distribution of your workforce, but a sum insured of 2x salary should be available without their having to provide any medical evidence.

A cheaper option is personal accident cover. As its name implies, there is no cover for sickness. However, lump sums are paid for a range of injuries and death wherever and whenever they occur. This will be very valuable to an individual who has to stop work for a while and may, if the accident occurs at work, head off a damaging Employers Liability claim.

Q: What is the outlook for premiums?

A: It is always notoriously difficult to predict but all the indications are that they must rise. Insurers have been buying market share over the past few years and have relied on rising stock markets to make profit. With the fall in markets and insurers, much like banks, having to take a more prudent approach to business, I expect to see stronger underwriting and higher premiums.