Business Interruption Insurance Claims Hong Kong, what is business interruption insurance, business loss insurance

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 is business interruption. Business interruption cannot be controlled and has an awful impact on the company. A business interruption is when a sudden event forces a business to shut down temporarily and pause all business activities.

The interruption period is usually when the business tries its best to deal with the unfortunate event and recover. However, the company will have to deal with financial losses due to rent, salaries, and other ongoing expenses. Just because the business is on pause doesn’t mean its expenditures will waver.

For this reason, many businesses purchase business interruption insurance to be prepared for the worst. The article will discuss what interruptions can force your business to pause and why this insurance is critical (to all industries). 

What Is Business Interruption Insurance?

Business interruption insurance is a policy that covers and reimburses income lost following a disaster. It allows business owners to focus on rebuilding and resolving the problem.

The insurance will reimburse costs such as rent, income, salaries, and other additional expenditures. Almost like the business interruption never happened – these costs will be calculated according to the previous months. In addition, business interruption insurance can be bought as an extension to property all-risk insurance.

It is also crucial to understand this insurance will not cover any pandemic or epidemic interruptions.

Business Interruption Causes

Fire Interruption

One of the most dangerous causes of interruption claims is fire. The most common causes of fires are cooking equipment, heating equipment, electrical and lighting equipment, or intentional fire setting. A fire can damage any business that works in the office or on-site.

Business interruption Fire, F&B Industry, business continuity insurance

The most common place of fire is in the food industry. One slip can turn a cooking fire into a property fire. The pause can completely cut off income for months and ruin the business.

For example, in Hong Kong in 2020, a Nepali restaurant caught fire, and the fire burned all property. They had to shut down till repaired – Unfortunately, they did not have the funds to repair due to the interruption.

Businesses must purchase business interruption insurance to avoid interruption and financial loss from fire damage. The insurance will reimburse any loss of income and interruption costs. Therefore, it helps the business focus on rebuilding burnt or damaged property to relaunch.

Flood Interruption

Flood interruption claims are similar to fire, not as dangerous to touch but as disastrous to the business. A flood can be caused by burst pipes, taps left on or heavy rain. Floods can also occur anywhere, from restaurants to retail stores and commercial offices. Flooding can damage the building, fixtures, products and expensive equipment.

Business Office Flooded Hong Kong, bi insurance, business interruption risks

The damages may take months to recover from and cause the business a large amount of financial loss. For example, a retail store may be forced to close for months when a water tap explodes, damaging all its products and electronic goods. In addition, the store will still be responsible for paying rent and staff salary, causing them to lose money for months.

Flood interruption will also be covered by business interruption insurance. Due to financial support, the policy will help the business move on from the unfortunate event. In addition, the insurance allows the company to pay its necessary bills and not compromise its future financial plan.

Cyber Attack Interruption

Cyber attacks are one of the most common threats in all businesses. Especially when companies are dealing with sensitive data or providing services online. A cyber attack is one of the factors that will force a business to pause its activities to deal with the cyber attack. Business interruption is necessary to prevent the threat from spreading, as the company must protect its data.

cyber threat, Business ransomware, types of cyber attacks

A cyber attack can force a business to shut down to keep the attack retained temporarily. For example, recently, A Top U.S. fuel pipeline operator’ Colonial Pipeline’ was forced to shut its entire network after a ransomware attack temporarily. The business explained they had to shut down to understand and resolve the issue. As a result, they lost millions of dollars as they were the source of nearly half of the U.S. East Coast’s fuel supply.

Business interruption insurance will NOT cover intangible interruptions like cyber threats. A business will need cyber insurance. Cyber insurance helps deal with the attack and will cover the interruption. It is a common interruption that can lead to financial and data loss without cyber insurance.

Natural Disaster Interruption

Natural disasters are unforeseen; a slight bit of rain can turn into a massive storm. There are various natural disasters that can affect each country. They destroy everything in the way, including business property. Like fire or flooding, the business must pause to rebuild when the property is heavily damaged. Property damage is already costly enough to recover from, but the interruption would worsen the financial loss.

Natural disaster Hong Kong destroys business, business risk exclusion, business interruption insurance cost

Natural disasters can include storms, hurricanes, tsunamis, earthquakes or forest fires. Any of these disasters can destroy a location and the property around it. For example, the recent heavy rain around southeast asia has caused severe flooding damage to many stores, forcing them to shut down. Hence, they gain no income from paused months, making it harder to relaunch.

Natural disasters are horrible to deal with, but the combination of property all-risk and business interruption insurance will make it easier to bounce back. In addition, combining both insurances will help solve most natural disaster financial problems, from income loss to property damage costs.

How Can Business Interruption Insurance Help?

Business interruption insurance is essential when starting a business, especially in specific industries. As mentioned, business owners can purchase the policy with property all-risk insurance – to get comprehensive protection against interruption risks. Combining these insurances will avoid substantial financial losses and provide peace of mind when moving forward.

The financial safety avoids a complete business shutdown, as repair costs and income loss may be too much. Therefore, the business can fix everything and focus on relaunching without stress.

However, business interruption has a deductible based on days of interruption. Typically, most policies will not cover the first hours/days of business interruption (depending on the specific policy). Therefore, this insurance’s primary purpose is to support a company when facing big catastrophes, not for minor damages. For example, if a toilet flood closes the business for one day, the insurance will not cover the income loss.

Business interruption is uncontrollable, but you should be at least protected and prepared to face the worst as a business owner.

 

To Learn More about business interruption insurance in Hong Kong and Asia, contact Red Asia Insurance.