When a company is the victim of a loss, the consequences generated by the interruption of activities can potentially impact the turnover. The continuity of the business may be compromised unless it has taken out business interruption insurance. The latter covers professionals and businesses against various types of damage and generally functions like any other type of insurance.
What does business interruption insurance consist of?
A company faced with a loss can experience a relatively long period of business interruption depending on the nature of the catastrophic event. Turnover can thus suffer a significant drop in turnover, while costs (taxes, charges, fees, etc.) remain fixed in all situations. Taking out business interruption insurance will therefore make it possible to compensate policyholders until they re-establish a situation conducive to the resumption of activity.
The insurance company will then proceed to pay compensation to offset the said decline, while allowing the victims to restart business under better conditions. The guarantee is especially recommended to policyholders whose premises and equipment are exposed to any risk of damage.
The guarantees offered by business interruption insurance
The basic insurance automatically covers damage related to any natural (storm, lightning, water, snow, etc.) and accidental (vehicle impact, explosion, fire, etc.) damage. It will then compensate for the loss caused by the shutdown, fixed charges as well as the reimbursement of expenses incurred by the company or professional in order to maintain activities following the disaster.
As for the complementary guarantees, they complete the basic contract by allowing a reimbursement of the penalties for late payment by the insured. The addition of these coverages can also reimburse miscellaneous expenses in order to avoid loss of clientele. Finally, the insurance company can offer extensions of guarantees that can cover other types of defects (equipment breakage, lack of supplier, administrative decisions, theft, etc.) that have caused damage, even if they do not significantly affect the business.
Compensation periods
An expertise will be conducted in order to determine the period during which the insurance will take over, and the determination of the said period will then be carried out taking into account several parameters. Indeed, the duration of compensation will depend firstly on the time required to restore the premises, replace the equipment and the time required to resume production. Lastly, the calculation will take account of the general state of the company, i.e. whether it is still able to continue its activity or not and whether the sector in which it operates presents significant competition.
The cost of the annual contribution, on the other hand, varies according to the duration of the compensation established, the nature of the activities and the initial value of the goods concerned.