Did You Know? Consideration for Determining Indemnity Period in Business Interruption Insurance Policy

Business Interruption policy provides coverage to replace the Insured in the same financial position as if the insured event does not occur. One of the important components in this Business Interruption coverage is the Indemnity Period.

The Indemnity Period is defined as “the period beginning with occurrence of loss, the destruction or damage occur and ended not later than the maximum Indemnity Period thereafter during the result of the business shall be affected in consequence of thereof.”

The following are some points for your consideration in determining the length of the indemnity period to ensure that an adequate indemnification is provided after the loss:

1. Ability to Respond The Incident - Even though a Business Continuity Plan (BCP) has been set by a company, often this plan cannot be implemented when the losses occur. So that, other plans are made to manage the crucial situation and reduce the incidence of losses.
2. Time to Reinstate The Damaged Items - Some factors should be considered such as time required for debris removal, authority investigation, time required for the repair process, retraining staff, and system/facility adjustment process.
3. Regaining The Lost Market - An important factor for recovering business losses is the extra time to regain the market position. It will depend on the market situation and may need some time to achieve it.

The explanation above are some points that can be taken into consideration in determining Indemnity Period for your Business Interruption Insurance Policy. Please feel free to contact us at 021 - 2523110 if you have any inquiries related to the insurance policy and we will be pleased to assist you.