Business interruption insurance

Business interruption insurance compensates for financial losses caused by the interruption of activities. Such interruption may be caused by fire, water damage or breakdown, for example, which prevents the continuation of normal operations. We can help you identify the risks to your business and get the right type of interruption cover at the best possible price.

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What is covered by business interruption insurance?

Business interruption insurance covers loss of income if your business has to be interrupted due to an unexpected event such as fire, breakage or other damage. It helps the business to maintain financial stability and viability.

With business interruption insurance, you can focus on recovering quickly and efficiently because your financial support is protected. This allows you to get back to business as usual more quickly.

Investors and financiers also appreciate companies that are protected against potential risks. Business interruption insurance can make a company more attractive as an investment and facilitate access to finance.

Interruption insurance can cover, for example:

  • Fixed costs: rents, salaries and other regular payments that continue even if the business is interrupted
  • Loss of turnover: lost revenue that the business would normally have received if the business had continued uninterrupted

It is important to note that the coverage and conditions of business interruption insurance vary from one insurance company to another and from one insurance contract to another. An insurance broker will help you determine what is relevant for your organisation and obtain comprehensive cover at the best possible price. 

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When should you not take out business interruption insurance?

Although interruption insurance is one of the most important forms of business insurance for many, it is not always necessary.

For example, if a company is able to continue operations at another location, the cost of the disruption may be tolerably low and the risk worth bearing.

An insurance broker will help you to assess the potential disruption based on their experience and knowledge of the industry. He will help you determine what kind of interruption insurance cover your organisation needs.

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Determining the amount of insurance for business interruption insurance

Interruption insurance aims to cover the company's income and fixed costs, i.e. those costs that continue despite the interruption of the business (e.g. salaries).

However, any savings in fixed costs, such as reduced staff costs due to redundancies or reduced energy consumption, are taken into account when calculating the compensation.

The three most commonly used methods for calculating the amount of insurance cover for business interruption insurance are as follows:

1. Interruption cover

The most common method is to determine the amount of insurance cover for interruption, based on the company's profit and loss account.

The insurance cover can be calculated from the budgeted turnover, minus variable costs, which usually cease in the event of an interruption. Such costs include purchases of materials and external services such as subcontractors, cleaning, transport and temporary staff.

The interruption cover could therefore be calculated using a formula:
turnover - (materials + services)

2. Excess costs

If the insurance amount for an interruption insurance policy is based on extra costs, the amount of extra costs incurred in the event of an interruption is estimated.

For example, in the event of fire damage, operations would have to be relocated to temporary premises, resulting in costs for equipping the premises and increased rental costs. In an industrial company, extra costs could arise if the production of a broken machine is subcontracted.

3. Maximum amount of compensation

The third option is to agree a fixed maximum amount of compensation with the insurance company. This could consist, for example, of a sum for the interruption margin, staff costs and extra costs.

A broker will help you find out what is the most sensible way to determine the amount of interruption insurance cover for your organisation.

In the event of an interruption loss, it is always a good idea to contact your broker for more detailed instructions. The broker can also help you negotiate compensation with the insurance company if necessary.

Did you have an accident?

In the event of an interruption, an insurance broker is a valuable support. Naturally, the broker's aim is to obtain the maximum amount of compensation for his client. However, unlike in the case of property damage, it is generally not possible to determine the absolute amount of the loss in the case of interruption. Therefore, compensation for interruption is usually the result of lengthy negotiations and compromises.
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The most common interruption insurances

The most common interruption insurance policies are phenomenon-based insurance policies linked to a company's property insurance. These typically include fire, natural hazard, spill and crime cover. In most insurance companies, this is known as business interruption insurance, which can be extended to include breakdown insurance. It can also be called AR (all risks) insurance.

In addition to this, insurance companies offer a variety of interruption insurance policies designed to meet specific, more detailed needs.

Examples of different types of interruption insurance include.

Epidemic interruption

An epidemic interruption covers the insured business interruption loss when the health protection authority has, by written order under the law on infectious diseases or animal diseases, restricted the insured business at the fixed place of business specified in the policy.

Personal accident insurance

Business interruption insurance covers loss or damage caused by business interruption when the interruption is the direct result of an accident, illness or death of an insured person, within the scope of the insurance. Interruption insurance is usually taken out specifically for key people in the organisation.

Interruption of rental income

Rental income interruption covers the loss of rental income due to interruption. This insurance is particularly important for property companies and other businesses whose activities include owning and renting buildings or premises to third parties. For example, fire damage can prevent the use of premises and interrupt the payment of rent to the owners of the property or premises.

Dependency suspension

Dependency interruption insurance covers you in situations where you are dependent on a partner. A named direct business customer or supplier and a customer or supplier within the same group are in a dependency relationship. In addition, anonymous direct customers or suppliers form a separate category. The dependence on utilities such as heat, electricity and water provided by a public utility or another utility is also an important factor in the context of this guarantee.

Interruption of delay

Delay suspension compensates for economic loss resulting from a delay in the commissioning of a single designated investment in construction or machinery due to damage. Construction insurance may include rush costs to cover overtime, temporary installation and procurement rush costs incurred in connection with the loss to be indemnified in order to bring the damaged work site into working order.

Event suspension

Event suspension compensates for the financial loss resulting from the cancellation of a single event or a series of events. Event suspension is always an individually tailored insurance. Cancellations may be caused by damage to the building, machinery or equipment at the venue, the incapacity of a named performer, or the inability to organise the event due to a lack of electricity or heat. A bomb threat, for example, can also cause a cancellation.

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