What is Business Interruption Insurance?

Business Interruption Insurance

Business Interruption Insurance comes in addition to Property All Risks and/or Machinery Breakdown Insurances.

Business Interruption Insurance (BI) is sometimes also called Loss of Profit Insurance (LOP) or Loss of Income Insurance .

Coming after a claim blocking the normal use of your assets and resulting in significant financial consequences. This policy covers your company following consequence of the downturn that might often be long.

The Insurance Policy allows the company to offset the impact of lower revenue and covering the fixed charges.

At the end this insurance will also help the company to incur extraordinary costs from the consequential loss.

What is covered?

Loss of Profit Insurance basically can covers:

  • Your income or your profits (that should have been earned without this Business Interruption)
  • Your rent that you are still liable to pay during the period of interruption or your loss of rental income if your are owner of the premises
  • Wages and Salaries for the period of interruption
  • Additional expenditures

Depending of your insurer, you can have some free extensions such as:

  • Closure by public authority (generally in case of sanitary issues)
  • Prevention of access (in case of problems within the vicinity)
  • Accidental shut down of public utilities

What should you know?

There are many points that are important to know before subscribing your Business Interruption Insurance:

  • This insurance always come as an extension of your Property All Risks Insurance.
  • Unless some extensions (such as public utilities), the basic coverage needs a damage/loss in your premise and therefore a PAR claim to be activated.
  • As most insurance policy, there is a deductible to the BI. Here this comes under the form of a Time Excess of 48 hours. Meaning that you need to be impacted more than 2 days in a row to benefits of your Insurance Policy
  • Loss of income or profit will be based on your latest financial statements

Good to know!

Business Interruption in Hong Kong is one of the section of Office/Shop package and automatically come free of charge with the coverage of your additional expenditures. Depending of your insurance company, from HKD 500,000 to HKD 1,000,000 on a 12 months basis.

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When starting a business, most company founders focus on the positive side of running a business and push the negative side far back. They are right; an entrepreneur needs to be positive. Unfortunately, the negative side and risks don't just disappear. As soon as one starts a  business, it is essential to understand these risks and have unique protection or plans to face them. One of the risks includes business interruption risk. Business interruption cannot be controlled and has an awful impact on the company. A business interruption is when a sudden unanticipated event forces a business to shut [...]