Insurance Of Property Losses Resulted From Disruption Of Production

Loss from damage of any property is clear to everyone. But the damage from disruption of production process is probably clear just to industrialist and businessmen though long ago in many countries it became a normal practice of business insurance.

So, what losses will be suffered by the entity or company in case of temporary disruption of the production? First, it is a salary of employees working according to the employment contract. Secondly, a rent and utility costs which anyway should be paid. Thirdly, interest payment for additional days of the current assets taken on credit. Fourthly: possible spoil of goods having small storage life. Fifth: the half-received profit on manufactured goods for days of idle time. Sixth, the costs connected with additional start of production. Seventh, the expenses directed on minimization of losses from a production disruption and also individual losses which the businessman perhaps has. As we can see, there are enough losses.

Of course it is impossible to hope that any insurance company completely will undertake such amount of risks. But the insurance of similar losses surely is followed by property insurance.

Specific of property insurance against idle time is in that fact that the extent of damage directly depends on idle time duration. Therefore in the agreement terms of compensation of damage by insurance company should be surely specified.

Also there are always certain restrictions in such agreements, such as, the franchise (it can be monetary or temporary).

In the agreement the damage is divided into three components: expenses incurred in case of production process stop, half-received profit, additional expenses incurred for the purpose of reducing the damage.

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