Business Interruption Insurance
The goal of business interruption insurance is to protect business operations against financial losses and possible additional expenses arising from the interruption of work.
The accompanying cash flow may sometimes be left unnoticed.
Business Interruption Insurance is related to Corporate Property Insurance, since interruptions resulting from a loss event having occurred based on property insurance risks are subject to indemnification. The concluding of a property insurance contract is the prerequisite for concluding a Business Interruption Insurance contract – both contracts must have been concluded with the same insurer.
The sum insured equals the gross profit and/or the amount prescribed for compensation of additional costs. Gross profit means the sum of the profit from sales and alternating wages in the company. Profit from sales refers to turnover from which operational costs have been deducted. Upon insuring the indemnification of additional expenses, the costs pertaining to interruption of work, which may arise upon the quicker restoration of the company's cash flows, shall be agreed upon with the insurer.
The standard insurance period is one year, although contracts also contain the definition 'indemnity period. The indemnity period means a period of time during which the insurance indemnity is paid. The length of the indemnity period depends on how fast the damaged equipment can be acquired or the building restored and the planned gross profit achieved. Although the length of the liability period is important when determining the amount of the insurance premium, it is recommended that the period not be shorter than 6 months.