Business Interruption Policy: Main Features & Common Misconceptions

Regardless of the size and efficiency of your business, in the event of a man-made of natural disaster your company will have increased costs while at the same time its profits will be reduces. The operations of one company are often temporary interrupted due to accidents such as floods and fires or in the event of a robbery or brake-in, This interruption of the business operations leads to reduced revenue. With little profit and the increased costs required for the business to recover the final result is a major financial loses that can ruin the overall operation of your company. That’s why all businesses should have a business interruption policy that can provide coverage when the operation of the company is compromised due to man-made or natural disaster. The insurance policy is designed to protect your gross profit, while at the same time cover all the additional expenses while your business is in the recovery phase.

In this article we will discuss the main features of the business interruption policy and explain some common misconceptions. It’s important to know that that the insurance policy won’t provide cover for just about any accident that affects your business. There are three limited situations when the policy will provide coverage. The first situation is when the premises of your company have been damaged to that extent that you must interrupt all your business operations. The insurance will also cover the costs that arise due to a physical damage to the property that prevents employees to have access to the business. The third situation for which the insurance policy can provide coverage includes the loss of public utilise and damage to contents due to a natural disaster such as fire, storm or earthquake.

The most common misconception about business interruption coverage is that in many cases it doesn’t have a useful purpose. Well, this is not true at all. It represents an important part of the insurance plan of any successful company. The protection it provides when such as disaster strikes that it prevents the normal operation of your business is of vital importance for preserving the place of your company on the business scene. The main purpose of the insurance is to return your business to the same trading position it was before its operations were affected by a natural or man-made disaster. When you make a claim the insurance policy will usually cover any of the pre-tax financial loses in profits as well as the extra costs that arise due to the interrupting event.

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