World Library  
Flag as Inappropriate
Email this Article

Business interruption insurance

Article Id: WHEBN0028236243
Reproduction Date:

Title: Business interruption insurance  
Author: World Heritage Encyclopedia
Language: English
Subject: Insurance
Collection:
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Business interruption insurance

Business interruption insurance (also known as business income insurance) covers the loss of income that a business suffers after a disaster while its facility is either closed because of the disaster or in the process of being rebuilt after it. A property insurance policy only covers the physical damage to the business, while the additional coverage allotted by the business interruption policy covers the profits that would have been earned. This extra policy provision is applicable to all types of businesses, as it is designed to put a business in the same financial position it would have been in if no loss had occurred.[1]

This type of coverage is not sold as a stand-alone policy, but can be added onto the business' property insurance policy or comprehensive package policy such as a business owner's policy (BOP). Since business interruption is included as part of the business' primary policy, it only pays out if the cause of the loss is covered by the overarching policy.[2]

Coverage

The following are typically covered under a business interruption insurance policy:

  • Profits- Profits that would have been earned (based on prior months' financial statements);
  • Fixed Costs- Operating expenses and other costs still being incurred by the property (based on historical costs);
  • Temporary Location- Some policies cover the extra expenses for moving to, and operating from, a temporary location;
  • Extra Expenses- Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired;
  • Civil Authority Ingress / Egress- Government-mandated closure of business premises that directly causes loss of revenue.[3] Examples include forced business closures because of government-issued curfews or street closures related to a covered event.[4]

This coverage extends until the end of the business interruption period, which is determined by the insurance policy. Most 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.[5]

In addition, businesses can purchase contingent business interruption coverage, which pays out when a business is unable to operate because of an event (such as a natural disaster) that damages the business premises of one of its suppliers, thus preventing it from engaging in normal trade.[6]

References

  1. ^ "Business Income Insurance: Having and Understanding This Coverage Can Be Essential to a Company's Survival". adjustersinternational.com. 2011. Retrieved July 28, 2014. 
  2. ^ "Do I need business interruption insurance?". iii.org. 2011. Retrieved August 15, 2011. 
  3. ^ Berry, Doug (2001). "Business Interruption for Denial of Access to Insured Property". irmi.com. Retrieved May 23, 2013. 
  4. ^ "Understanding Civil Authority and Ingress/Egress Insurance Coverages". businessincomeworksheets.com. 2009. Retrieved May 23, 2013. 
  5. ^ Thompson, Gary (2011). "Four Rules for Measuring the Business Interruption Period". adjustersinternational.com. Retrieved July 28, 2014. 
  6. ^ Torpey, Daniel (2003). "Contingent Business Interruption: Getting All the Facts". irmi.com. Retrieved May 22, 2011. 

See also

  • Airmic Property Damage and Business Interruption Benchmarking Report 2012
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 


Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.