Property Insurance
Business Interruption Insurance (Loss of Profit Insurance)
Business Interruption Insurance (BI) provides financial protection when a business is forced to suspend or reduce operations due to an insured peril, such as fire, natural disasters, or other covered risks. It helps businesses recover lost income and cover fixed expenses until normal operations resume.
Why is Business Interruption Insurance Essential?
- Protects Against Revenue Loss
- Ensures Business Continuity
- Covers Operating Expenses
- Helps with Temporary Relocation
- Essential for Businesses Dependent on Physical Locations
Important Things You Should Note
- Linked to Property Insurance – Business Interruption Insurance is typically an add-on to Fire & Special Perils Insurance or Property All Risk Insurance.
- Triggered by Physical Damage – Business interruption must result from physical damage due to an insured peril.
- Coverage Period Matters – The policy covers losses only for a specific duration (Indemnity Period), usually 3 to 12 months.
- Exclusions Apply to Pandemics – Many policies do not cover losses from pandemics like COVID-19 unless explicitly included.
- Essential for Small & Medium Businesses (SMEs) – Large corporations may have reserves, but SMEs can suffer severe financial stress without BI insurance.
What is Covered & What is Not Covered?
What is Covered?
- Loss of Gross Profit/Revenue – Covers profits lost due to the disruption.
- Fixed Operating Expenses – Rent, salaries, utility bills, and loan repayments.
- Temporary Relocation Costs – Costs of moving to a temporary site to continue operations.
- Extra Expenses for Recovery – Any additional costs needed to resume business faster (e.g., expedited shipping, hiring temporary staff).
- Loss Due to Supplier Disruptions – Some policies cover income loss if key suppliers or partners suffer damage affecting your business.
What is Not Covered (Exclusions)?
- Non-Physical Damages – Losses due to a drop in market demand, economic downturn, or brand reputation damage.
- Pandemics & Communicable Diseases – Unless specifically included.
- Utility Failures Outside Premises – Power outages or internet disruptions that do not involve property damage.
- Losses Beyond Indemnity Period – Coverage is limited to predefined months after the incident.
- Government Actions & War – Losses due to government-imposed shutdowns, wars, or political events.
Frequently Asked Questions (FAQs)
How is the claim amount calculated in Business Interruption Insurance?
The insurer evaluates the business’s financial records and calculates the loss based on historical profits, fixed expenses, and operational costs during the affected period.
Can I buy Business Interruption Insurance as a standalone policy?
No, it is usually an add-on to a Property Insurance policy like Fire & Special Perils Insurance or Industrial All Risk Insurance.
How long does Business Interruption Insurance cover losses?
The coverage lasts for the Indemnity Period, usually ranging between 3 to 12 months, depending on the policy terms.
Does this policy cover supply chain disruptions?
Yes, some policies cover losses due to supplier disruptions if the supplier’s premises suffer damage from an insured peril.
Does Business Interruption Insurance cover cyberattacks?
No, standard BI policies do not cover cyberattacks. Businesses should opt for Cyber Insurance to protect against losses from cyber incidents.
