What is a key factor in assessing the value of business interruption insurance?

The value of business interruption insurance is primarily assessed based on the previous income levels of the business. This is because the core purpose of business interruption insurance is to compensate for lost income that a business would have generated if it had not been interrupted by a covered event, such as a fire or natural disaster.

Previous income levels provide a benchmark for estimating the future income the business can expect to earn, which is crucial for determining the amount of coverage necessary. Insurers typically look at historical financial data to gauge the business’s typical performance and project potential earnings during the period of interruption.

While the date of loss occurrence, duration of business operations, and policy renewal date are relevant in the overall context of an insurance policy, they do not directly influence the valuation of the coverage in the way that previous income levels do. The financial history gives a clearer picture of the impact that a business interruption would have on revenue, which is essential for both the insurer assessing risk and the insured seeking compensation.