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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 a business facility or outlet or for the lost time to rebuild after a disaster. It is busines income insurance.

It differs from property insurance loss or damage. Property insurance covers the property damage to busines premises, a fitout and stock. Business interruption insurance covers the lost profits and business income that would have been earned. It 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. These conditions are explained in the business interruption definition section of the policy

 

What Does Busines Interruption Insurance Cover?

Business interruption insurance can cover:

  • Lost profits that would have been earned, based on prior financial statements.
  • Operating expenses still being incurred by the damaged property.
  • Additional or extra expenses or increased costs 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. This is known as the indemnity period. Most business insurance policies define this period as the period of time 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 or loss of income.

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 being able to lodge a business interruption claim for financial loss will help.

 

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