Business interruption insurance provides cover against loss or damage to the income or profit streams of a business due to an interruption in the business operations.
In simplest terms the business interruption policy is designed to put the business back to the same financial position it was enjoying before the loss.
A force outside your control may interrupt your business continuity strategy and cause you to close your doors for a time. This could result from fire, hail, windstorm, vandalism, and/or equipment damage. Without an insurance protection plan, your business may simply go down the plughole in the event of a loss.
If you are closed for business because of any of these unforeseen accidents/losses there are fixed expenses that you still have to meet for example you still have to pay employees, rent or mortgage, suppliers, taxes and yourself. These fixed costs together with expected profits, constitute real business losses during the interruption period.
Why it’s so important
There is much more to protecting the investment that your business is to you than simply insuring the physical assets of the business. The owners, shareholders, and/or those that have provided investment finance expect an income stream that will cover the financing costs, the costs of operating the business and an acceptable level of net profit to reward them for the business risk that they have taken, their entrepreneurial skill, a return on their assets and so forth.
Business interruption insurance can keep capital flowing through your company in the event of such disruptions. It can help you to:
- Maintain your business continuity strategy
- Keep your business afloat if a loss forces you to close for a short time
- Pay for lost net income and continuing expenses
- Pay your relocation and advertising fees if you set up shop at a temporary site
Business Interruption Insurance Covers:
- Profits you would have earned, based on your financial records, had your property not been damaged by the covered disaster.
- Fixed operating expenses that occur even if the main business activities are temporarily stalled.
- Some policies cover expenses incurred from operating out of a temporary location while the original premises are being repaired.
The cover starts from the date of the loss and extends to when the business’s turnover and profit levels are back to where they would have been but for the loss. There is a cap set on this, known as the Indemnity Period, which is chosen by the Insured when the cover is taken out and is recorded in months on the Policy Schedule.
Business Interruption Insurance may be extended to cover fines or penalties for breach of contract following an Insured loss such as fire, lightning etc and the amount payable as the indemnity hereunder is the sum which the insured shall legally be liable to pay and shall pay in discharge of fines or penalties incurred solely in consequence of damage for non completion or late completion of orders.
Because time is money, why would you take a risk by leaving your investment exposed when Capitol Insurance is there to craft products that are tailored to suit your needs.