Business Interruption Insurance
Business Interruption Insurance is a type of insurance coverage that protects businesses from unexpected disruptions or interruptions to their regular operations resulting in financial losses. It compensates for lost income and additional losses when the company halts due to unforeseen situations.
This insurance covers specific events, such as natural disasters (e.g., hurricanes, earthquakes), fires, explosions, vandalism, or other perils. If the onset of such events leads to a temporary closure or significant reduction in business operations, a policyholder can file a claim to recover financial losses.
Business interruption insurance is relevant to a wide range of businesses across various industries. Generally, any business that relies on continuous operations to generate income should consider this type of coverage.
Small and medium-sized enterprises (SMEs), Retail businesses, Restaurants and the hospitality industry, Manufacturing companies, Professional services firms, and technology companies can consider Business interruption insurance.
Lifecycle Fire and General are insurance brokers that help their clients offer suitable plans that cover the risks faced by a business and its ability to handle the financial impact of an interruption. We assess business vulnerabilities and help clients choose the appropriate coverage for their needs.
The coverage provided by business interruption insurance typically includes
- Loss of Income: The insurance policy compensates the business for the income it would have earned during the period of interruption, based on historical financial records and projections.
- Operating Expenses: Necessary ongoing expenses, such as rent, utilities, salaries, loan payments, and other fixed costs, even if the business is temporarily closed.
- Temporary Location: If the company runs from a temporary location until the restoration time, the policy may cover the additional relocation cost.
- Extra Expenses: The policy may also cover additional costs incurred to minimise the impact of the interruption, such as increased advertising or overtime wages to expedite the recovery process.
- Extended Period of Indemnity: Business interruption insurance often provides coverage for a specified period after the business is fully operational again. This extension accounts for the time required to regain pre-interruption levels of income and profitability.
The Business Interruption Insurance cover the following
- Extra Expenses: Business interruption insurance may cover extra expenses incurred by the business to minimise the impact of the interruption. It includes expenses related to expedited repairs, overtime wages, additional advertising or marketing efforts, or costs associated with setting up temporary operations.
- Dependent Property: If your firm relies on other businesses or suppliers to operate, and an interruption occurs at those dependent properties (such as a supplier’s facility), business interruption insurance can offer coverage for the resulting loss of income.
- Civil Authority Closure: In some cases, when government authorities issue an order that prevents access to the business premises due to a covered event (e.g., a mandatory evacuation during a natural disaster), business interruption insurance can cover the resulting income loss.
- Extended Period of Indemnity: Business interruption insurance may offer coverage beyond the immediate restoration period, allowing for additional time for the business to regain its pre-interruption income levels.
Some common examples of what business interruption insurance generally does not cover
- Acts of terrorism, war, or nuclear incidents, may be excluded from coverage.
- Normal wear-and-tear, maintenance, and gradual deterioration of property or equipment.
- For utility service interruptions (e.g., power outage, water supply disruption), extended service outages that affect multiple businesses in an area, such as rolling blackouts, may not be covered.
- Any loss due to pandemics or any infectious diseases.
- When interruptions happen due to a reason or known to be imminent (e.g., a scheduled maintenance shutdown).
- Cover losses caused by external events.
Lifecycle Fire and General offer Business interruption insurance that covers various aspects of financial loss and additional expenses that a business may incur due to an interruption in its operations caused by a covered event.
It’s essential to note that business interruption insurance typically requires a triggering event specified in the policy, such as fire, natural disaster, vandalism, or other covered perils.
We help our clients access deductibles, waiting periods and coverage limits that help business owners choose the best plan for their business.