Business Interruption Insurance provides cover for the actual loss of profits sustained as a result of the business interruption caused by an accident indemnifiable under material damage Insurance. Basically, a loss due to an interruption or interference of business operation is made up of the following factors:
• The reduction in turnover resulting from a decrease or other impairment of business operations caused by loss / damage.
• The increase in the cost of working i.e., the additional expenditure necessarily and reasonably incurred for avoiding or diminishing reduction in turnover which but for that expenditure would have taken place during the indemnity period in consequence of loss / damage
• An increase in the cost of working may result from additional shift or overtime work and charges for immediate repairs, the hiring of substitute equipment, etc.
It should be borne in mind that as a general rule, in order to provide valid ground for a claim under the Business Interruption Policy the following conditions must be complied with;
• The interruption or interference with the business must be the result of destruction or damage caused by the "insured" peril under the material damage Policy
• The damage must occur at premises used by the Insured for the purposes of the business, the address / addresses of which are stated in the Policy schedule
• The damage must cause interruption of or interference with the business and must be in consequence of the destruction of or damage to any property or any part thereof used by the Insured at the premises for the purpose of the business. This rules out loss due to personal injuries or death of an Insured or Directors or employees of the company, even though this is caused by one of the insured perils. Further, the loss covered is that sustained by the business of the Insured, that is, the business as described on the policy schedule. Therefore, if an insured is engaged in more than one business at the premises the insurance will apply only to such businesses as may be mentioned and described in the schedule of the Policy.
• There must be in existence material damage insurance under which liability for the claims has been admitted.
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