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Business Interruption Insurance Demystified

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We Explain What Business Interuption Insurance Is

Business interruption insurance covers the loss of income that a business suffers after a disaster such as closing of a business facility or outlet or for the time to rebuild after a disaster.

It differs from property insurance in that property insurance covers the physical damage to premises, a fitout and stock. Business interruption insurance covers the profits that would have been earned and is designed to put a business in the same financial position it would have been in if no loss had occurred.

Business interruption insurance is usually added on to a business property insurance policy and not sold as a stand-alone policy. It only pays out if the cause of the loss is covered by the business property policy.


What Does Busines Interruption Insurance Cover?

Business interruption insurance can cover:

  • Profits that would have been earned, based on prior financial statements.
  • Operating expenses still being incurred by the damaged property.
  • Additional expenses associated with operating from a temporary location while the damaged property is being repaired.
  • Claims preparation costs incurred when your accountant prepares your claims submission.

This coverage extends until the end of the business interruption period selected at the time of buying a business insurance policy. Most business insurance policies define this period as starting on the date of the covered peril and the damaged property is physically repaired and returned to operations under the same condition that existed prior to the disaster.

Any business that has to close down while their premises are being repaired may lose customers to competitors. A quick resumption after a disaster is essential and business interruption insurance will help.


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