In an unlikely event of damage to property, your business could suffer thousands in losses as operations may come to a temporary halt until necessary restorations have been made. Business interruption insurance, added on as an endorsement to your commercial property insurance, will pay for the actual loss of business income incurred due to interruptions in operations due to direct physical loss, damage or destruction to property. Read below to better understand the various terms commonly used in business interruption insurance.
Business Income: The insurer is liable to pay any reductions in net income caused by temporary interruptions in operations due to damage to insured’s property, plus the normal operating expenses.
Actual loss: Dollar amount equivalent to the loss sustained will be paid if damage to property, resulting from the hazards stated in the policy, causes an interruption in business amounting to a business income loss. The amount of actual loss covered is capped by the applicable policy limit.
Period of restoration: Period of restoration is the amount of time required to repair or replace the damaged property. The period of restoration is the length of time right after the damage occurs and till the repairs have been completed.
Extra Expense: Any expense incurred by the insured to minimize/curtail the loss or to keep the business afloat is considered as business income loss. However, only expenses with dollar value less than the dollar value impact on the claim will be paid. Any expense that is greater than the claim itself will not be paid for. For example, a $20 additional expense incurred that reduces claim by $10 will not be accommodated.
Contingent Business Insurance: CBI provides protection against any business loss incurred by the insured because of interruptions in businesses of direct suppliers or receivers of the goods/services of the insured. For such a loss to go through as a business income loss, the business of the insured must have direct dealings with the business of the person that suffer a loss/damage to property. CBI can be added on as an endorsement to your commercial property insurance.
Zensurance is Canada’s leading online commercial insurance broker. We offer a full range of insurance products to small businesses, with a particular focus on digitizing businesses and technology startups. We understand what it is to work with new technology, and know the most common risks of which you should be aware. Based on that (and a lot of analytics), we recommend the ideal insurance coverage for your business.