What happens if an accident in my premises causes my business to
shut down while repairs are being carried out?
When property is destroyed or damaged by fire, the owner, if he or she is adequately insured, is indemnified by the payment of a sum of money which will enable him or her restore the buildings and their contents to their pre-fire condition. He or she has lost something tangible, the monetary value of which is known or can be assessed. If, however, the property was used by him or her for business purposes, he or she has also lost his or her productive capacity or future earning power which, though tangible, is of paramount importance to him or her.
For both manufacturers and traders, their normal business activities may cease or be curtailed to a degree dependent upon the extent and form of the damage. They will have suffered a loss as a consequence of the fire which cannot be assessed or quantified until some uncertain future date when they regain their earning power as a result of the reinstatement of their property or by some other means.
The following factors are considered in assessing Business Interruption Risk:
- The degree of hazard
- The exposure of the business to interruption or interference by (a) the spread of the premises (there may be two or more separate buildings but they may operate independently of each other). The dependence of the business on a particular part of the premises e.g. a power house may be indispensable for the working of a factory
- Whether the business is a seasonal one
- The length of the indemnity period
- Specialised manufacture (difficulty in replacing specific machinery)
- Aspects of competition and the ability of the business to recover lost customers after damage to its premises
