Business Interruption Insurance

In India, no. It is usually an “add-on” or a “consequential loss” policy that must be attached to a Base Policy. FLOP (Fire Loss of Profit): Triggered if a fire, flood, or riot stops your business. MLOP (Machinery Loss of Profit): Triggered if a critical machine breaks down and stops production.

This is the most important decision you’ll make. It is the maximum time (e.g., 3, 6, 12, or 24 months) the insurer will pay your lost profits. In India, you should choose a period based on how long it would realistically take to import new machinery or rebuild your factory considering local government permits.

Yes, if you include them under “Standing Charges.” This is vital in India because if you stop paying your skilled workers during a 4-month repair, they will leave for a competitor, and you won’t be able to restart your business.

If you rent a temporary warehouse or outsource your production to another factory to keep your customers happy while your plant is being repaired, the extra rent and costs are covered under the ICOW section of this policy.

Insurers look at your Audited Financial Statements from the previous year. They compare your “Standard Turnover” (what you earned in the same months last year) with your “Actual Turnover” during the interruption. The difference is what they pay out.

Yes. Most Indian policies have a “Time Excess” of 3 to 7 days. This means the insurance only starts paying from the 4th or 8th day of the shutdown. Small delays are expected to be managed by the business.

Yes, via a “Contingent Business Interruption” extension. If your factory is fine, but your main supplier’s factory in another state burns down and you cannot get raw materials, this extension will cover your resulting loss of profit.

In India, for a Business Interruption claim to be valid, you must first have an admitted claim under your Fire or Machinery insurance. If the physical damage isn’t covered, the loss of profit won’t be covered either.