What happens if your business in Germany stands still for three months tomorrow? A fire, a major water leak, or a burglary can destroy machines or make sales rooms unusable. While Contents Insurance replaces the material damage, the clock ticks mercilessly on your running costs. Business Interruption Insurance protects what keeps your business running: your cash flow.
The Story of Martin: When the workshop burns, but wages continue
Martin runs a carpentry shop in Rheine-Mesum. Two years ago, the unthinkable happened: a technical defect in a suction roll triggered a smoldering fire during the night. The fire department was quick to arrive, but the soot and smell made the entire factory hall unusable for months.
His contents insurance paid for the damaged machines, but the renovation took almost half a year. During this time, Martin couldn't complete a single order. His revenue dropped to zero. But: the rent for the hall, the leasing rates for the vehicle fleet, and – most importantly – the wages for his five employees continued.
Without his Business Interruption Insurance (often also called Loss of Earnings Insurance), Martin would have had to file for insolvency. The insurance took over the ongoing fixed costs and also paid him for the lost profit. His employees stayed on board, and after six months, the carpentry shop was able to start up again in full. Martin says today: "The new planing machine was important, but the money for the salaries during the forced break saved my business."
What Business Interruption Insurance covers
Essentially, it's like "daily sickness allowance insurance for your company." As soon as an insured property damage (fire, water damage, storm/hail, burglary/vandalism) paralyzes your business, the protection kicks in:
- Continued payment of fixed costs: Rents, leases, interest, leasing rates, and insurance premiums.
- Continued payment of wages and salaries: So you don't lose your qualified specialists.
- Replacement of lost profit: As if the damage had never occurred.
- Coverage of additional costs: For example, for renting replacement rooms or temporary solutions to resume operations faster.
Which form is right for your business?
Depending on the size and industry of your company, there are different approaches:
- Small Business Interruption (SBI): Usually as an add-on to contents insurance. The sum insured often corresponds to the value of the inventory. Ideal for small offices or shops.
- Medium Business Interruption: An independent contract with more detailed determination of the sum insured based on your gross profit.
- Large Business Interruption: For manufacturing companies with complex supply chains and dependencies.
Important parameters in the consultation
As your broker with a market overview, I pay particular attention to two factors:
1. The Indemnity Period: This is the period for which the insurance pays. Is 12 months really enough to rebuild a burnt-down hall and get new permits? Often 18 or 24 months are the safer choice.
2. The Sum Insured: We work together to determine your actual gross profit so that no underinsurance occurs, which in an emergency would reduce the payout.
Risk-Check: What does a standstill cost you per day?
Calculate here what the financial consequences of a business interruption would be for your company. Continued fixed costs and lost profit are taken into account.
Rent, wages, interest, insurance etc.
Never underestimate the recovery time. Planning permits or specialized machine deliveries often take months.
Requirements for Expats
- German Business Registration (Gewerbeanmeldung or Freelance Tax ID)
- German Business Address
- German Bank Account (IBAN)
Frequently Asked Questions
Which fixed costs are covered by business interruption insurance?
What does the indemnity period mean in business interruption?
When exactly does the loss of earnings protection take effect?
Are damages from fire, water, and storm always covered?
What are contingent business interruption losses?
How is the correct sum insured determined?
Related Topics:
Requirements for Expats
- German Business Registration (Gewerbeanmeldung or Freelance Tax ID)
- German Business Address
- German Bank Account (IBAN)