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How does interruption insurance work?

Interruption insurance, also known as business interruption insurance, is a type of coverage that helps businesses recover financial losses resulting from unexpected interruptions to their normal operations.

Here’s how interruption insurance typically works:

  1. Triggering Events:

    • Interruption insurance is often triggered by specific events outlined in the policy. Common triggers include natural disasters (e.g., earthquakes, floods), fire, vandalism, or other perils specified in the policy.

  2. Business Interruption:

    • When a covered event occurs and interrupts the normal course of business, the insurance policy kicks in. The coverage is designed to compensate the business for the income lost during the interruption period.

  3. Covered Losses:

    • Business interruption insurance covers various types of losses, including lost revenue, ongoing expenses (such as rent and utilities), and additional costs incurred to minimize the impact of the interruption.

  4. Indemnity Period:

    • Policies often include an indemnity period during which the business is eligible to receive compensation for covered losses. This period is typically defined in the policy and may extend until the business is fully operational again.

  5. Claim Process:

    • In the event of an interruption, the business owner must file a claim with the insurance company. The claim should include details of the event, evidence of the financial losses incurred, and other relevant documentation.

  6. Insurance Adjuster Evaluation:

    • After receiving the claim, the insurance company assigns an adjuster to assess the losses. The adjuster evaluates the documentation, conducts investigations if necessary, and determines the amount of compensation the business is entitled to receive.

  7. Compensation Payment:

    • If the claim is approved, the insurance company issues compensation to the business owner. This financial support helps the business cover ongoing expenses and recover lost income during the interruption.

It’s essential for businesses to carefully review the terms and conditions of their interruption insurance policy to understand the specific coverage, exclusions, and limitations. Additionally, businesses may need to document their financial records and losses thoroughly when filing a claim to ensure a smooth and efficient process.