Business Interruption Insurance

What is Business Interruption Insurance Coverage?

Business interruption insurance or business continuity coverage is an extended benefit under a property all-risk policy or a fire & allied perils plan. It covers the loss of gross profit a business may suffer if an insured event disrupts its business activities. It can also cover additional costs incurred to keep the business running or minimise the interruption, such as ongoing rent and relocation costs during the repair.

Interruption is a major concern for businesses of all sizes in the UAE. It not only leads to financial losses but also holds back the revenue and growth. However, business interruption insurance (BII) starts to compensate your business from the day an unforeseen event occurs to the day when your business completely gets back on track.

While the interruption cover period may vary depending on the policy, many insurers offer indemnity coverage for 1 to 12 months. Keep in mind that the interruption is only to compensate for the covered incidents under your fire and allied perils or property all risk insurance plan.

Why is Business Interruption Insurance Important for UAE Companies?

Business interruption insurance coverage works as a risk management tool for companies of all sizes in the UAE. Several unforeseen events, like fire, flood, and storm, can damage a business’s physical structure, temporarily suspending operations and leading to financial loss. In such scenarios, this insurance policy fills the coverage gap and helps businesses recover losses and restart operations.

Here are the key benefits of business continuity insurance in UAE:

• Covers Several Risks: If your business relies on physical assets, events like fire or natural disasters can disrupt operations. BII covers losses caused by damage to physical assets resulting from insured events.
• Business Disruption Coverage: It covers the loss of income during the interruption period if your business is temporarily stopped due to an insured event.
• Covers Fixed Costs of Business Operations: Even when operations are closed, expenses like rent, salaries, and utility bills may continue. Your insurance policy can help your company cover such eligible fixed costs during the interruption.
• Covers Increased Cost of Working: Business interruption policy can cover additional expenses incurred to keep your business running or minimise disruption, such as renting temporary premises or equipment.
• Helps in Business Recovery: By covering eligible financial losses after an insured event, BII gives your business the financial support needed to resume normal operations and recover faster.

Who Needs Business Continuity Insurance in the UAE?

All businesses looking to build a safeguard strategy against sudden business shutdowns must have business interruption insurance (sometimes called business disruption insurance). Furthermore, if your business operation or revenue depends on the property and location, don’t skip adding this to your existing plan.

Here are some of the common businesses that should consider this insurance policy:

• Pharmacies, hospitals, clinics, and all healthcare outlets
• Hotels, restaurants, and cafes
• Retail shops, electronic shops, and boutiques
• Hypermarts and supermarts
• Warehouses and logistics companies
• Manufacturing and production units
• Corporate offices (SME, mid-sized, and large offices)
• Fitness centres and gyms

What is Covered in Business Interruption Insurance?

A comprehensive business continuity insurance plan offers the following coverages:

• Loss of Gross Profit: If the damage causes your sales/turnover to fall below the expected level, the policy can compensate for the resulting loss of gross profit.
• Ongoing Business Expenses: The policy compensates for the ongoing business expenses, such as utility bills, rent, workers’ salaries, loan repayments, and more.
• Auditor’s Fees: Plans cover reasonable fees paid to auditors for preparing and certifying the financial information and supporting documents required to substantiate a claim.
• Temporary Relocation Cost: Due to the insured event, if you temporarily relocate your business to a new place, the policy covers the cost.
• Increased Expenses: Your policy can help the business in covering additional expenses to resume the business quickly, such as emergency equipment rental costs.
• Recovery During the Indemnity Period: The policy can respond to the financial loss during the selected indemnity period. This period allows the business to recover from the interruption and make new business strategies.

What is Not Covered Under Business Disruption Insurance?

Many incidents and scenarios are excluded in a typical business interruption insurance policy in the UAE. Some of the key exclusions are:

• Damage due to poor maintenance
• Subterranean fire
• Losses not documented in your business records
• Damage due to negligence
• Nuclear explosion
• Ionising radiations or contamination by radioactivity
• War, invasion, and riots
• Property burning as per the Public Authority order
• Cyber incidents (separate cyber insurance is required)
• Loss due to uninsured incidents

How Does Business Interruption Insurance Work in the UAE?

A business interruption policy doesn’t pay for the repairs of damaged property due to covered events. Instead, it covers the financial loss that your business suffers due to the damage and helps in continuing your business operations.

Let’s understand this in a simple way:

Infographic Source: Claude

What are the Benefits of Business Income Insurance in Dubai?

Think that a business income insurance policy or business interruption coverage is less important than other plans? These advantages can change your mind

• A comprehensive policy gives a financial pillar to your business operations, helping promote continuity and ongoing growth.
• You can continue to manage your business without constantly worrying about what will happen to your business revenue if an unexpected event occurs.
• You can focus more on growing your business, as the coverage provides financial support during an unexpected interruption.
• It helps you maintain business continuity, which can help protect your reputation and relationships in the market.
• Your plan can compensate for the loss of income or revenue and certain fixed expenses.
• It can help your business recover faster from a covered loss or damage and resume normal operations.
• You can continue meeting certain employee-related expenses during an interruption, helping you retain your workforce while your business recovers.

How Much Does Business Interruption Insurance Cost?

As we saw earlier, a business interruption insurance policy comes as an add-on under property-all-risk insurance or fire and allied perils insurance. So the premium of this coverage depends on the main plan and the insurer.

With that said, here are the factors that impact the costs:

• Industry: If you operate in a high-risk industry, such as construction, manufacturing, and more, your premium may be high.
• Business Size: The number of employees and the size of your business directly impact the premiums. The bigger the employee count, the higher the price.
• Annual Turnover: Higher business income generally means a higher potential loss. This may require a higher sum insured, which costs your business a bit more.
• Indemnity Period: A longer indemnity period can increase the premium. This is because the insurer would have to cover losses for a longer time.
• Location and Risk Exposure: The location of the business and its exposure to risks such as fire, flooding, or other insured perils can influence the premium. The higher the risk — whether due to the location or the industry — the higher the premium.

Find the Right Business Interruption Insurance Coverage With Policybazaar UAE

At Policybazaar.ae, we understand that there is no universal insurance coverage that fits all types of businesses.

To help you find tailored coverage, we help you compare top plans from the trusted insurers in the UAE. Our experts also take time to understand your business’s needs and match you with the right policy. This not only helps you compare and choose the right plan but also helps you customise the coverage as per your needs.

You can enjoy plenty of benefits by choosing Policybazaar.ae for your business insurance needs:

• Top plans from 35+ insurers
• Expert guidance in policy selection
• Quick and transparent online application process
• Claim assistance
• Affordable insurance plans

How Much Business Interruption Insurance Coverage is Right for Your Business?

There is no one-size-fits-all coverage amount for business interruption insurance in the UAE. The right coverage amount or sum insured depends on how much financial support your business would need to manage its expenses and recover after an insured interruption.

Start by assessing your potential loss of income during the recovery period. Consider your usual business income, ongoing expenses, and the time your business may realistically need to resume normal operations.

Your coverage should also account for additional costs that may arise while minimising the interruption, such as temporary arrangements or alternative ways of operating.

Reviewing your coverage regularly is also important, especially when your business grows, you are an SME, or your financial position changes. You can consult with the experts available on Policybazaar.ae to understand your business needs and get the right plan.

Documents Required to Buy Business Interruption Insurance

Typically, you may require the same documents that you submitted while getting property all risk insurance, as this coverage ultimately comes as an add-on under the plan.

The documents to buy a standard business interruption plan are as follows:

• Trade licence
• Memorandum of Association (MoA) and Articles of Association (AoA)
• Emirates ID of authorised signatories
• Passport copy of authorised signatories or company owners
• Payroll and expense details
• Financial statements (typically of 1-3 years)
• Business location and activity details
• Previous insurance and claim details (if any)

Business Interruption Insurance vs Property All Risk Insurance

Many business owners confuse business interruption policy with property all risk. To steer clear of this confusion, here are the common differences:

Business Interruption Insurance Policy Conditions and Terms

Business insurance coverage comes with several terms and conditions that define your claims and what your policy covers. But we also understand that many terms might be jargon for you. So we’ve simplified the most common policy terms to help you understand your plan better:

• Indemnity Period: The maximum period for which your insurer covers the financial loss caused by a covered interruption
• Gross Profit Basis: A method of calculating the business loss based on the decrease in gross profit caused by an insured event
• Revenue/Turnover Basis: The financial loss calculated by comparing the actual revenue earned after the insured event with the revenue the business would normally have expected to earn.
• Rate of Gross Profit: The percentage of gross profit earned in relation to your business’s turnover. Insurers typically use this figure to help calculate the loss of gross profit following an interruption.
• Material Damage Provision: Business interruption cover applies only when the interruption results from physical damage to insured property.
• Waiting Period/Time Access: The initial period after an insured event or policy purchase during which the business interruption loss may not be covered.
• Temporary Location/Premises: When you shift your business to an alternate location and don’t operate in your usual premises due to property damage.

Frequently Asked Questions

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