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Business Interruption Insurance

Provide helps you get the best Business Interruption Insurance to give your business daily cash when operations are disrupted.
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Business Interruption Insurance protects your business from disruptions that cause your business to temporarily cease operations.

This type of insurance gives you a daily cash payout when you cannot run your business normally. This interruption could be from a fire, burst pipes, or many other causes.

What Does Business Interruption Insurance Cover?

Business interruption insurance covers the insured for the loss of income after a disaster. Indemnification is provided to cover for operating expenses such as income loss, loss of rental income, staff costs and other overheads (power, water, gas, etc) For the case of SMRT railway track failure, aside from the $5.4mil penalty imposed on the company, there are other cost associated with rectifying the problem. In this case, the loss of business income (transport fares) is more apparent when railway service downtime takes a longer time to rectify. Passengers will need to be shuttled by other transport means (eg buses, coaches) to nearby stations or bus interchanges and this indirectly incurs additional cost of operations, further dampening the profitability of its operations. More SMRT staffs / engineers will need to be deployed to assist in diverting human traffic/ crowd control, and/or to shorten the repair time for the failed railway track system, leading to increased cost of working (staffs cost) Other coverage that business interruption insurance offers is the replacement of goods or inventories that has been damaged or lost from the disaster.

What Does Business Interruption Insurance Cover?

1) Loss In Gross Profits: Pays for lost profit (sales-cost) while your business could not operate.
2) Loss in Gross Revenue
3) Increased Cost of Working: Pays for additional expenses incurred (e.g. extra workers, repairmen, etc.) to reinstate your business into operational condition again
4) Loss of book debts
5) Loss of rent receivables: Pays for rent income that you could not collect while your business could not operate.

Do I Need Business Interruption Insurance?

This policy is helpful if you:
  • Are worried that you will lose customers if you are unable to operate your business due to disruptions
  • Want to protect your business revenue streams
  • Are unable to continue to manage the business after allocating additional cost to the repair and reinstatement of the property/equipment due to the accident
  • Are unable to estimate the potential cost of rectification works after the disaster
  • Want to limit the amount of liabilities associated with disruptions to your business

What Does Business Interruption Insurance Not Cover?

Exclusions under the policy will include the following:
  • Loss of income due to partial closure of the business (the business may still be allowed to operate but at a lower capacity, hence business interruption claims will not be admitted)
  • Income that is not documented (Poor accounting does not recognise income that has been earned, and revenue that is not booked cannot be indemnified)
  • Losses due to non-covered damages

How Much Does Business Interruption Insurance Cost?

The coverage amount needs to take into account the current revenue, potential revenue and the period of restoration after the disaster incident. Many businesses often makes the mistake of underestimating the cost of repair & restoration, and this expense could snowball to a large amount if the period of restoration take months or years to bring the business back to a fully functional state.
Specialised equipments are typically more expensive to re-purchase or make, or reallocation of business premises could be made more difficult in an inaccessible country/ state. As each business is setup differently, owners need to evaluate the following points which would ultimately determine the cost of the insurance policy:
  • Expected growth and inflation
  • Moving and relocation costs
  • Costs associated with doing business from a temporary location, such as exterior signs and other advertising
  •  Bills you won’t have to pay, such as building maintenance fees
  • Employee costs for staff who won’t be employed during the rebuild, including employee benefits and workers’ compensation insurance