Business Interruption Insurance

Any damage of a greater extent caused to property by natural events such as a fire, flood, windstorm, or other is accompanied by financial losses, which may significantly affect the existence of any business. The business interruption insurance covers the restriction or total interruption of the insured operation as a result of damage to the insured property. The insurance covers the loss of gross profit (from the sale of goods, own products or services provided) due to the interrupted operation of the undertaking, increased operating costs expediently incurred to reduce the drop of turnover and fixed costs (e.g. salaries and wages, instalments and interest on loans, insurance premiums, rental costs, costs of maintaining patent rights, advertisements and advertising agreed in advance, media, costs of maintenance of buildings and equipment, etc.), which the undertaking must pay until the moment of restoration of production, which was before the property-related insured event or expiration of the warranty period.

The warranty period is the period of time during which the insurer warrants for any damage due to interruption of business. It starts at the moment of material damage and ends at the moment when the damage from the interruption of business no longer occurs, but no later than the time agreed in the insurance policy. The insurance is subject to agreement on deductible with regard to insured events, which is expressed either by a specific number of days or a combination of a percentage and a number of days.

The importance of the insurance

The business interruption insurance is a follow-up insurance coverage of property, its purpose is protection against decrease of profits or loss of position in a competitive market during the period of renewal of the operation of the damaged or destroyed production unit as a result of a natural disaster. The aim of the insurance is to compensate for lost profits, or costs to such an extent as if the insured event had not occurred at all. The important fact is that it is a follow-up insurance, which means that it cannot be arranged separately, but only as a follow-up to the property insurance.