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Insurance against stoppage of activity for enterprises

Insurance against stoppage of activity for enterprises

Under a property insurance contract, the insurer provides insurance protection against damage resulting from business interruption and/or loss of profits resulting from loss of or damage to insured property that are related to the following insured events:

The sum insured is set based on maximum potential losses from interruption of the activity insured, which the policy holder would suffer during 12 months’ period in case of complete cessation of insured activity.

Typically, the insured sum includes:

  • fire, lightning, household gas explosion;
  • fall of flying objects or debris on insured property;
  • natural disasters;
  • explosion of steam boilers, gas storage facilities, gas pipelines and other similar machines and devices;
  • damage by water from water supply, sewerage, heating and fire protection systems;
  • burglary, robbery;
  • malicious acts of third parties;
  • cargo handling;
  • running-down by vehicles;
  • risks associated with use of electrical equipment.

1. Policy holder’s profit for the 12 months preceding the date of insurance contract.

2. Fixed costs of the insured for the 12 months preceding the date of insurance contract signing.

If production or commercial activities of the insured are terminated, wholly or partially, due to the onset of material damage, business interruption is considered fait accompli. Material loss occurs when the insured property is damaged or destroyed as a result of an insured event, the compensation for which must be paid by the insurer.

Loss from interruption is formed by:

  • fixed costs imposed on the policy holder necessary for continuation of activity insured during a break in production;
  • loss of income from insured economical activity resulting from break in production.

Fixed costs include:

  • wages and salaries of employees of the insured;
  • social security and similar payments;
  • rent of space, equipment or other property leased by the insured for his business;
  • taxes and charges payable regardless of turnover and results of operations, in particular, real estate taxes, land taxes, funds or assets taxes, registration fees, etc.;
  • interest on loans or other funds raised, if these funds were invested in the activity of the insured, which was interrupted by the onset of material damage;
  • depreciation in accordance with the rates established for enterprise of the insured.

Loss of profits — this is the profit that the policy holder would have received, were it not for the break in production:

  • for manufacturing enterprises — from production of goods;
  • for establishments in the sphere of service — from provision of services;
  • for mercantile establishments — from sale of goods.

Insurance covers losses from business interruption for 6, 9 and 12 months according to the choice of policy holder.

Insurance coverage for losses from business interruption and/or loss of profits is available only in addition to property insurance contract.

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