Business Interruption Insurance

Worse than the loss due to the risk of fire and the damages it may cause as a result, is to be unable to continue doing business after the break of the fire. Although the business stops due to this calamity, there are certain standing charges that will independently continue irrespective of the situation that the insured is placed in. These expenses such as bank interests, employee's salaries, rent, electricity and other standing charges will still need attention in addition to the loss of revenue. This results in a loss of gross profits due to reduction in turn over and increased cost of working during the period of interruption.

For Business Interruption cover to operate it is compulsory that there be in place a Property All Risks or Fire Insurance Policy. This cover takes into consideration the following aspects which should be addressed when opting for this cover, as follows:-

Gross Profit

The amount by which the sum of the value of the turnover and the value of the closing stock exceed the sum of the value of the opening stock and the amount of the specified working expenses. The values of the opening and losing stocks shall be arrived at in accordance with the Insured's normal accountancy methods, due provision being made for depreciation.

Net Profit

The Net Trading Profit (exclusive of all Capital receipts and accretions and all outlay properly chargeable to Capital) resulting from the business of the Insured at the premises after due provision has been made for all standing and other charges including depreciation.

Standing Charges

Interest, Rent, Bank Charges, Insurance Premium, Advertising, Printing, Stationery, Electricity, Traveling Expenses, Maintenance of Plant and Machinery, Depreciation of Building, Plant and Motor Vehicles etc.

Annual Turnover

The Money paid or payable to the Insured for goods sold and delivered and for services rendered in course of the business at the premises.

Limit and Period of Indemnity

Whilst the period of insurance is 12 months, the indemnity period differs. This would depend on the period the insured would necessary prepare to come back to the position they were before the loss in terms of both property and trading. Reasonably the periods would be anything between six to eighteen months. The limit also would differ. However, it would basically be worked out based on the Indemnity amount payable by the insurers which will be in respect of :

a) Reduction in Turnover
b) Increase in cost of working

The rate chargeable is always applied on "Per Mille" basis (for every thousand units) on the Total Sum Insured (Turn Over) and is very dependant to the limit and period of indemnity, nature of risk, location and the housekeeping. There are both time and monetary Deductible for each and every loss in addition to a number of other Conditions.