Business Interruption Insurance
AdvancedBusiness interruption insurance is insurance that covers the loss of income and extra costs a business suffers when it cannot operate normally because of physical damage to its property from an insured event, such as a fire or flood.
When a business's premises or equipment are damaged, property insurance pays for repairs, but the business may also lose months of revenue while it cannot operate. Business interruption insurance replaces the lost profit and helps pay continuing costs, such as rent, wages and loan payments, during the recovery period.
It is usually added to a property insurance policy and typically requires physical damage from a covered peril to trigger it. Policies set an indemnity period, the maximum time for which losses are covered.
For example, a restaurant forced to close for four months after a kitchen fire could claim for the profit it would have earned, ongoing staff costs and the cost of temporary measures to reopen sooner.
During the COVID-19 pandemic, many businesses that closed due to lockdowns found their business interruption policies did not cover them, because there was no physical damage, leading to large disputes and court cases in several countries. Contingent business interruption cover can extend protection to losses caused by damage at a key supplier or customer.
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