insurance

Period of Indemnity

The maximum length of time a business interruption insurance policy will pay for lost income and ongoing expenses after a covered loss. This period typically ranges from several months to two years, depending on the policy terms.

Example

“The restaurant's business interruption policy had a 12-month period of indemnity, which provided adequate coverage for lost income during the kitchen renovation after the fire.”

Memory Tip

Think 'TIME to make you whole' - indemnity means making you whole, and this sets the TIME limit for how long that lasts.

Why It Matters

The period of indemnity determines how long you'll receive financial support to rebuild your business after a disaster, making it crucial for business survival. Choosing too short a period could leave you without coverage during extended recovery times, while too long a period increases premium costs unnecessarily.

Common Misconception

Business owners often think the period of indemnity begins when they reopen, but it actually starts immediately after the covered loss occurs. This means time spent on repairs and reconstruction counts against your total coverage period, not just the time spent getting back to normal operations.

In Practice

Sarah's bakery suffers a fire on January 1st with a 18-month period of indemnity and $15,000 monthly coverage. Repairs take 6 months, and she reopens July 1st but doesn't reach pre-loss income levels until December 1st. Her policy pays $15,000 monthly from January through July (7 months at full coverage) plus partial payments from August through December based on actual income shortfall, totaling approximately $140,000 in benefits over the 18-month period.

Etymology

From Latin 'indemnitas' meaning 'unhurt' or 'free from loss,' combined with 'period' from Greek 'periodos' meaning 'a going around' or 'cycle.'

Common Misspellings

period of indemnatyperiod of indemnityperiod of indemityperiond of indemnity

Related Terms

Business Interruption Insurance

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