Other Than Life (OTL) Practice Exam

What is Business Interruption Insurance primarily intended to cover?

1. Insurance against the supplier's premises being shut down

2. Insurance against the insured's business being shut down

3. Coverage for employee wages

4. All of the above

The correct answer is: All of the above

Business Interruption Insurance is primarily designed to protect against the financial loss that a business experiences when it is temporarily unable to operate due to certain unforeseen events, such as natural disasters, fires, or other incidents that disrupt normal operations. The coverage typically includes loss of income, ongoing expenses, and, in some cases, payroll costs. The correct answer indicates that this type of insurance encompasses various aspects of operational disruption. It not only provides protection for the insured's own business being shut down—which prevents them from generating revenue—but also addresses scenarios where external factors, such as a supplier's premises being shut down, impact the insured's ability to operate successfully. Furthermore, it may cover employee wages to ensure that workers can be paid even during periods of halted business activities, which can help retain talent and ensure a swift recovery once operations resume. Therefore, the comprehensive nature of Business Interruption Insurance explains why it covers all the mentioned elements, making it essential for businesses to safeguard against a range of disruptions that can affect their financial stability.