Business Interruption is an additional cover that can be bought under the Accidental Damage policy. Basically, when a fire occurs, besides the loss of property damage caused by the fire, there is also the possibility of a loss caused by interruption to the business caused by the fire.
Business Interruption is an insurance against loss of business caused by the business interruption due to the damages caused by the perils that the business was insured against. The point of the Business Interruption is to make sure that the insured is put in the original position after the damage caused – as if the accident never happened. This means that any factory/retailer/landlord etc. who would need to stop business temporarily for the repairs caused by the risk insured should definitely look into buying business interruption insurance.
Point to note, the Business Interruption insurance only kicks in if the business interruption is caused by the risk insured. The Business Interruption is also called Profit Insurance or Income Insurance.
The Business Interruption Insurance premium depends on the Insurance taken and the Indemnity period. Insurance taken would be the details of the monthly Net profit of the business that the business would lose due to an interruption in the business. Indemnity period being the amount of time that you would like to seem protection for in the case of an interruption.
The longer the indemnity period, the higher the premium. An indemnity period of 3 Months does not mean that in case of business interruption you will be paid 3 months profits. It means that while you are repairing your business you will get the profit according to the insurance taken while your business is under repair.