BUSINESS INTERRUPTION AND LOSS OF PROFIT
Business interruption is the reduction or complete interruption of production/service in your business.
No matter your line of business, your company is exposed to numerous unforeseen risks. Sudden events such as fire, flooding, or acts of terrorism, as well as natural disasters like earthquakes, floods, and storms, can disrupt production processes. These incidents not only cause physical damage but may also lead to serious consequences such as loss of revenue, reduced cash flow, and, in the long term, even bankruptcy.
Business Interruption Insurance steps in during such circumstances to safeguard your business against potential revenue losses and the fixed expenses that arise as a result. It is an indispensable solution for ensuring financial sustainability during the critical post-loss period and facilitating the restoration of your operations to their previous state.
Business Interruption refers to the temporary suspension of a company’s operations. This situation may arise from various causes, including:
Natural disasters such as fire, flood, or earthquake
Machinery breakdowns or supply chain disruptions
Power outages
Legal restrictions (e.g., quarantine due to a pandemic)
Loss of Profit is the shortfall in net income resulting from business interruption. It refers to the loss of revenue that a company would have expected to earn had it been able to continue its normal operations.
Example: If a factory with a monthly turnover of 1 million TL is unable to operate for two weeks, it would incur a revenue loss of 500,000 TL. Since fixed expenses continue during this period, the net loss of profit may be even higher.
| Criteria | Business Interruption | Loss of Profit |
|---|---|---|
| Definition | Temporary suspension of operations | Revenue loss resulting from the interruption |
| Insurance Cover | Usually included within fire/business policies | Can also be arranged separately |
| Measurement | Time-based (days/duration) | Financial-based (measured in monetary terms) |
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