Popular insurance products like Fire Insurance, Machinery Breakdown Insurance cover the risk of physical damage to the assets. However the financial loss due to stoppage of work following a physical damage is not covered by these policies.
Business Interruption policies cover financial losses due to stoppage of work, which follows a physical damage either due to risks covered under a fire insurance or under a machinery breakdown insurance. These policies are also called Loss of Profit Insurance or Consequential Loss Policies. These policy provide financial relief only if the affected assets are also covered under a Fire Insurance policy or Machinery Breakdown Insurance, as the case maybe.
The policy covers:
- Loss of gross profit. Gross profit is defined as the net profit plus insured standing charges (fixed expenses).
- Increased cost of working
- The gross profit of the indemnity period selected is the sum insured under the policy.
The indemnity period is the maximum period required to put the business back into normal operation after damage to insured property by an insured peril. The indemnity period commences with the date of damage and lasts till such a time as the business is restored to its pre damaged level or the period stipulated in the policy, which ever comes first. The indemnity period could vary from 6 months to 3 years.
Extensions:
- Wages Lay – Off and Retrenchment Compensation and Notice Wages Liability
- Auditor’s Fees
- Supplier’s Extension
- Customer’s Extension
- Insured’s Property stored at other locations
- Public Utilities Extension
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