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What is Business Interruption Insurance?

Business interruption insurance is something that every business owner needs because it could determine whether or not your business stays afloat. Yes, business interruption insurance is here to keep you protected any time that your business has to close its doors. With this type of insurance, your business can be protected from a wide variety of risks. 

Think about it this way, what if your business has to close its doors for a week due to a heavy snowstorm? While snowstorms may be a temporary problem, there are more possibilities that your business should be prepared for. 

What if a fire broke out, and your business, unfortunately, had to shut down? Or, what if your business experienced theft, and the damage was irreversible? 

Chances are you don’t have the funds to keep your business afloat during these types of events. That is where Business Interruption Insurance comes in. 

Image of the words business and an under construction sign.

Understanding Business Interruption Coverage

According to iii.org, business interruption insurance can be as vital to your business surviving as a business as property insurance. Most people would never consider opening a business without buying insurance to cover damage due to weather-related events. But too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. 

Keep in mind. business interruption coverage is not a standalone policy. It has to be added to a property insurance policy or included in a package policy. 

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick reopening after a disaster is critical.

Image of a storefront with a sign saying closed due to fire.

With the right commercial insurance policy, business interruption insurance can:

  1. Compensate you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
  2. Cover your company for more than a few days with the proper limits. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
  3. Be more costly for some businesses. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location. 

Extra expense insurance

Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs.

If you need help with your commercial insurance policy or have questions about business interruption insurance, give us a call today at 860-684-5270

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